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 rM and ri will increase by 1%.
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 1%.
-Select-IIIIIIIVVItem 2
Both rM and ri will remain the same.
Both rM and ri will decrease by 1%.
rM will decrease by 1% and ri will remain
the same.
rM will remain the same and ri will
decrease by 1%.
Both rM and ri will increase by 1%.
1. Now assume that rRF remains at 8%, but
rM increases to 10%. The slope of the SML does not
remain constant. How would these changes affect ri?
Round your answer to two decimal places.
The new ri will be %.
2. Now assume that rRF remains at 8%, but
rM falls to 8%. The slope of the SML does not remain
constant. How would these changes affect ri? Round your
answer to two decimal places.
The new ri will be %.
Solutions
Expert Solution
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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 = 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 = 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
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...
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
= 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 = 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 = 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 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 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 = 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...