In: Finance
REQUIRED RATE OF RETURN
Suppose rRF = 8%, rM = 13%, and bi = 1.2.
What is ri, the required rate of return on Stock i?
Round your answer to two decimal places.
%
1. Now suppose rRF increases to 9%. The slope of the SML remains constant. How would this affect rM and ri?
2. Now suppose rRF decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri?
1. Now assume that rRF remains at 8%, but rM increases to 14%. 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 12%. 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 %.