Question

In: Finance

Suppose rRF = 3%, rM = 12%, and bi = 1.2. 2. Now suppose rRF decreases...

Suppose rRF = 3%, rM = 12%, and bi = 1.2.

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

-Select-IIIIIIIVVItem 3

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

      %

  2. 1. Now suppose rRF increases to 4%. The slope of the SML remains constant. How would this affect rM and ri?
    1. Both rM and ri will remain the same.
    2. Both rM and ri will increase by 1 percentage point.
    3. rM will remain the same and ri will increase by 1 percentage point.
    4. rM will increase by 1 percentage point and ri will remain the same.
    5. Both rM and ri will decrease by 1 percentage point.

    -Select-IIIIIIIVVItem 2

    1. Both rM and ri will decrease by 1 percentage point.
    2. rM will decrease by 1 percentage point and ri will remain the same.
    3. rM will remain the same and ri will decrease by 1 percentage point.
    4. Both rM and ri will increase by 1 percentage point.
    5. Both rM and ri will remain the same.
  1. 1. Now assume that rRF remains at 3%, but rM increases to 13%. 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   %.

    2. Now assume that rRF remains at 3%, but rM falls to 11%. 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   %.

Solutions

Expert Solution

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


Related Solutions

Suppose rRF = 3%, rM = 12%, and bi = 1.4. 2. Now suppose rRF decreases...
Suppose rRF = 3%, rM = 12%, and bi = 1.4. 2. Now suppose rRF decreases to 2%. 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 4%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease...
Suppose rRF = 3%, rM = 12%, and bi = 1.6. 2. Now suppose rRF decreases...
Suppose rRF = 3%, rM = 12%, and bi = 1.6. 2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and ri? -Select What is ri, the required rate of return on Stock i? Round your answer to one decimal place.   % 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...
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...
Suppose rRF = 4%, rM = 11%, and bi = 1.5. 2. Now suppose rRF decreases...
Suppose rRF = 4%, rM = 11%, and bi = 1.5. 2. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVV 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 ri...
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 = 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 = 7%, rM = 11%, and bi = 1.9. 2. Now suppose rRF decreases...
Suppose rRF = 7%, rM = 11%, and bi = 1.9. 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 = 11%, and bi = 1.5. 2. Now suppose rRF decreases...
Suppose rRF = 6%, rM = 11%, and bi = 1.5. 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 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 increase...
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...
10. Suppose rRF = 6%, rM = 11%, and bi = 1.3. 2. Now suppose rRF...
10. Suppose rRF = 6%, rM = 11%, and bi = 1.3. 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 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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT