Suppose rRF = 6%, rM = 9%, and bi = 1.8. What is ri, the required...

Suppose r_RF = 6%, r_M = 9%, and b_i = 1.8.

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?
1. Both r_M and r_i will remain the same.
2. Both r_M and r_i will increase by 1 percentage point.
3. r_M will remain the same and r_i will increase by 1 percentage point.
4. r_M will increase by 1 percentage point and r_i will remain the same.
5. Both r_M and r_i will decrease by 1 percentage point.

2. Now suppose r_RF decreases to 5%. The slope of the SML remains constant. How would this affect r_M and r_i?

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

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 %.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

1) Suppose rRF = 6%, rM = 9%, and bi = 1.5. What is ri, the...

1) Suppose rRF = 6%, rM = 9%, and bi = 1.5. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease by 1%. Both rM and ri will remain the same. Both rM and ri will increase by 1%. rM will remain the...

Suppose rRF = 6%, rM = 10%, and bi = 1.6. What is ri, the required...

Suppose rRF = 6%, rM = 10%, and bi = 1.6. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 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...

Suppose rRF = 6%, rM = 10%, and bi = 1.2. What is ri, the required...

Suppose rRF = 6%, rM = 10%, and bi = 1.2. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? rM will increase by 1% and ri will remain the same. Both rM and ri will decrease by 1%. Both rM and ri will remain the same. Both rM and ri...

Suppose rRF = 3%, rM = 10%, and bi = 1.4. What is ri, the required...

Suppose rRF = 3%, rM = 10%, and bi = 1.4. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will increase by 1%. rM will remain the same and ri will increase by 1%. rM will...

Suppose rRF = 4%, rM = 11%, and bi = 2.2. What is ri, the required...

Suppose rRF = 4%, rM = 11%, and bi = 2.2. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 5%. 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%. rM will increase by 1% and ri will remain the same. Both rM and ri will decrease by...

Suppose rRF = 4%, rM = 10%, and bi = 1.8. 2. Now suppose rRF decreases...

Suppose rRF = 4%, rM = 10%, and bi = 1.8. 2. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and...

Suppose rRF = 8%, rM = 9%, and bi = 1.6. Now suppose rRF decreases to...

Suppose rRF = 8%, rM = 9%, and bi = 1.6. Now suppose rRF decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri? What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 9%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both...

REQUIRED RATE OF RETURN Suppose rRF = 6%, rM = 13%, and bi = 1.7. 2....

REQUIRED RATE OF RETURN Suppose rRF = 6%, rM = 13%, and bi = 1.7. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rMand ri? What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rMand ri? Both rM and ri will increase...

Suppose rRF = 7%, rM = 9%, and bi = 2.2. 2. Now suppose rRF decreases...

Suppose rRF = 7%, rM = 9%, and bi = 2.2. 2. Now suppose rRF decreases to 6%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 What is ri, the required rate of return on Stock i? Round your answer to two decimal places. % 1. Now suppose rRF increases to 8%. The slope of the SML remains constant. How would this affect rM and ri? rM will increase by 1% and...

Suppose rRF = 6%, rM = 12%, and bi = 1.7. 2. Now suppose rRF decreases...

Suppose rRF = 6%, rM = 12%, and bi = 1.7. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 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...

Subjects