You have been managing a $5 million portfolio that has a beta of 0 95 and a required rate of return of 9 175 The current risk free rate is 3 Assume that you receive another $500,000 If you invest the money in a stock with a beta of 0 65, what will be the required return on your $5 5 million portfolio Do not round intermediate calculations Round your answer to two decimal places Suppose r RF 6 , r M 9 , and b i 1 4 What is r i , the required rate of return on Stock i Round your answer to one decimal place 1 Now suppose r RF increases to 7 The slope of the SML remains constant How would this affect r M and r i r M will remain the same and r i will increase by 1 percentage point r M will increase by 1 percentage point and r i will remain the same Both r M and r i will decrease by 1 percentage point Both r M and r i will remain the same Both r M and r i will increase by 1 percentage point Both r M and r i will decrease by 1 percentage point r M will decrease by 1 percentage point and r i will remain the same r M will remain the same and r i will decrease by 1 percentage point Both r M and r i will increase by 1 percentage point Both r M and r i will remain the same 1 Now assume that r RF remains at 6 , but r M increases to 10 The slope of the SML does not remain constant How would these changes affect r i Round your answer to one decimal place The new r i will be 2 Now assume that r RF remains at 6 , but r M falls to 8 The slope of the SML does not remain constant How would these changes affect r i Round your answer to one decimal place The new r i will be

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You have been managing a $5 million portfolio that has a beta of 0.95 and a required rate of return of 9.175%. The current risk-free

You have been managing a $5 million portfolio that has a beta of 0.95 and a required rate of return of 9.175%. The current risk-free rate is 3%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.65, what will be the required return on your $5.5 million portfolio? Do not round intermediate calculations. Round your answer to two decimal places.

Suppose r_RF = 6%, r_M = 9%, and b_i = 1.4.

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

1. Now suppose r_RF increases to 7%. The slope of the SML remains constant. How would this affect r_M and r_i?

r_M will remain the same and r_i will increase by 1 percentage point.
r_M will increase by 1 percentage point and r_i will remain the same.
Both r_M and r_i will decrease by 1 percentage point.
Both r_M and r_i will remain the same.
Both r_M and r_i will increase by 1 percentage point.
Both r_M and r_i will decrease by 1 percentage point.
r_M will decrease by 1 percentage point and r_i will remain the same.
r_M will remain the same and r_i will decrease by 1 percentage point.
Both r_M and r_i will increase by 1 percentage point.
Both r_M and r_i will remain the same.
1. Now assume that r_RF remains at 6%, but r_M increases to 10%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to one decimal place.

The new r_i will be %.

2. Now assume that r_RF remains at 6%, but r_M falls to 8%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to one decimal place.

The new r_i will be %.