As an equity analyst you are concerned with what will happen to the required return to...

As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 5%, rM = 13%, and bUT = 1.8. Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places. % Now suppose rRF increases to 6%. The slope of the SML remains constant. How would this affect rM and rUT? I. rM will remain the same and rUT will increase by 1%. II. rM will increase by 1% and rUT will remain the same. III. Both rM and rUT will decrease by 1%. IV. Both rM and rUT will remain the same. V. Both rM and rUT will increase by 1%. Now suppose rRF decreases to 4%. The slope of the SML remains constant. How would this affect rM and rUT? I. rM will decrease by 1% and rUT will remain the same. II. rM will remain the same and rUT will decrease by 1%. III. Both rM and rUT will increase by 1%. IV. Both rM and rUT will remain the same. V. Both rM and rUT will decrease by 1%. Now assume rRF remains at 5% but rM increases to 15%. The slope of the SML does not remain constant. How would these changes affect rUT? I. rUT will increase by 3.6%. II. rUT will remain the same. III. rUT will decrease by 3.6%. Now assume rRF remains at 5% but rM falls to 12%. The slope of the SML does not remain constant. How would these changes affect rUT? I. rUT will increase by 1.8%. II. rUT will remain the same. III. rUT will decrease by 1.8%.

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Required rate of return: As an equity analyst you are concerned with what will happen to the...

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