Question

eBook Problem Walk-Through 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 ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? -Select-IIIIIIIVVItem 3 Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. 1. Now assume that rRF remains at 6%, but rM increases 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 will be ___%. 2. Now assume that rRF remains at 6%, but rM falls to 9%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new will be ___

Answer 1

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