Suppose rRF $=6\%,$ rM $=13\%,$ and bi $=1\mathrm{.}7.$

What is ri$,$ the required rate of return on Stock i$?$ Round your answer to one decimal place.

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$1.$ Now suppose rRF increases to $7\%.$ The slope of the SML remains constant. How would this affect rM and ri$?$

rM will remain the same and ri will increase by $1$ percentage point.

rM will increase by $1$ percentage point and ri will remain the same.

Both rM and ri will decrease by $1$ percentage point.

Both rM and ri will remain the same.

Both rM and ri will increase by $1$ percentage point.

$-$Select$-$

$2.$ Now suppose rRF decreases to $5\%.$ The slope of the SML remains constant. How would this affect rM and ri$?$

rM will decrease by $1$ percentage point and ri will remain the same.

rM will remain the same and ri will decrease by $1$ percentage point.

Both rM and ri will increase by $1$ percentage point.

Both rM and ri will remain the same.

Both rM and ri will decrease by $1$ percentage point.

$-$Select$-$

$1.$ Now assume that rRF remains at $6\%,$ but rM increases to $14\%.$ The slope of the SML does not remain constant. How would these changes affect ri$?$ Round your answer to one decimal place.

The new ri will be

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$2.$ Now assume that rRF remains at $6\%,$ but rM falls to $12\%.$ The slope of the SML does not remain constant. How would these changes affect ri$?$ Round your answer to one decimal place.

The new ri will be

$\%.$Suppose $r_{RF}=6\%,r_M=13\%,$ and $b_i=1\mathrm{.}7$

a$.$ What is $r_i,$ the required rate of return on Stock i$?$ Round your answer to one decimal place.

$\%$

b$.1.$ Now suppose $r_{RF}$ increases to $7\%.$ The slope of the SML remains constant. How would this affect $r_M$ and $r_i?$

I. $r_M$ will remain the same and $r_i$ will increase by $1$ percentage point.

II$.r_M$ will increase by $1$ percentage point and $r_i$ will remain the same.

III. Both $r_M$ and $r_i$ will decrease by $1$ percentage point.

IV$.$ Both $r_M$ and $r_i$ will remain the same.

V$.$ Both $r_M$ and $r_i$ will increase by $1$ percentage point.

Now suppose $r_{RF}$ decreases to $5\%.$ The slope of the SML remains constant. How would this affect $r_M$ and $r_i?$

I. $r_M$ will decrease by $1$ percentage point and $r_i$ will remain the same.

II$.r_M$ will remain the same and $r_i$ will decrease by $1$ percentage point.

III. Both $r_M$ and $r_i$ will increase by $1$ percentage point.

IV$.$ Both $r_M$ and $r_i$ will remain the same.

V$.$ Both $r_M$ and $r_i$ will decrease by $1$ percentage point.

The new $r_i$ will be

$\%.$

The new $r_i$ will be

$\%.$