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Suppose r RF = 8%, r M = 9%, and b i = 1.3. What is r i , the required rate of return on
Suppose rRF= 8%, rM= 9%, and bi= 1.3.
- What is ri, the required rate of return on Stock i? Round your answer to two decimal places.%
- Now suppose rRFincreases to 9%. The slope of the SML remains constant. How would this affect rMand ri?
- Both rMand riwill decrease by 1%.
- Both rMand riwill remain the same.
- Both rMand riwill increase by 1%.
- rMwill remain the same and riwill increase by 1%.
- rMwill increase by 1% and riwill remain the same.
- Now suppose rRFdecreases to 7%. The slope of the SML remains constant. How would this affect rMand ri?
- Both rMand riwill decrease by 1%.
- rMwill decrease by 1% and riwill remain the same.
- rMwill remain the same and riwill decrease by 1%.
- Both rMand riwill increase by 1%.
- Both rMand riwill remain the same.
- Now assume that rRFremains at 8% but rMincreases to 10%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.The new riwill be%
- Now assume that rRFremains at 8% but rMfalls to 8%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places.The new riwill be%
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