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Suppose rRF 9%, rM 14%, and bi 1.3. a. What is ri, the required rate of return on Stock i? b. Now suppose rRF (1)

Suppose rRF 9%, rM 14%, and bi 1.3.

a. What is ri, the required rate of return on Stock i?

b. Now suppose rRF (1) increases to 10% or (2) decreases to 8%. The slope of the

SML remains constant. How would this affect rM and ri?

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