uppose ri=3%,n1=11%, and b1=1:2. a. What is n. the required rate of retum on stock i? Round your aniswer to one decimal place. 96 b. 1. Now suppose ras increases to 4%. The slope of the SML remains constant. How would this affect fin and n ? 1. ro will remain the same and n will increase by 1 percentage point. II. th will increase by 1 percentage point and n will remain the same. III. Both n and n will decrease by 1 percentage point. IV. Both n and n will remain the same. V. Both m and n will increase by 1 percentage point. 2. Now suppose rRP decreases to 2%. The slope of the SML remains constant. How would this affect rm and ri? I. Both rM and n will increase by 1 percentage point: II. Both ny and n will remain the same. III. Both ry and n will decrease by 1 percentage point. IV. ry will decrease by 1 percentage point and n will remain the same. V. Im will remain the same and n will decrease by 1 percentage point. c. 1. Now assume that ref remains at 3%, but rm increases to 12%. The slope of the SML does not remain constant. How would these change affect n? Round your answer to one decimal place. The new n will be %. 2. Now assume that res remains at 3%, but rM falls to 10%. The slope of the SML does not remain constant. How would these changes affe n? Round your answer to one decimal place. The new n will be %. uppose ri=3%,n1=11%, and b1=1:2. a. What is n. the required rate of retum on stock i? Round your aniswer to one decimal place. 96 b. 1. Now suppose ras increases to 4%. The slope of the SML remains constant. How would this affect fin and n ? 1. ro will remain the same and n will increase by 1 percentage point. II. th will increase by 1 percentage point and n will remain the same. III. Both n and n will decrease by 1 percentage point. IV. Both n and n will remain the same. V. Both m and n will increase by 1 percentage point. 2. Now suppose rRP decreases to 2%. The slope of the SML remains constant. How would this affect rm and ri? I. Both rM and n will increase by 1 percentage point: II. Both ny and n will remain the same. III. Both ry and n will decrease by 1 percentage point. IV. ry will decrease by 1 percentage point and n will remain the same. V. Im will remain the same and n will decrease by 1 percentage point. c. 1. Now assume that ref remains at 3%, but rm increases to 12%. The slope of the SML does not remain constant. How would these change affect n? Round your answer to one decimal place. The new n will be %. 2. Now assume that res remains at 3%, but rM falls to 10%. The slope of the SML does not remain constant. How would these changes affe n? Round your answer to one decimal place. The new n will be %