The slope of the sml does not remain constant

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Reference no: EM13861197

Suppose rRF = 8%, rM = 9%, and bi = 1.3.

  1. What is ri, the required rate of return on Stock i? Round your answer to two decimal places. %
  2. Now suppose rRF increases to 9%. The slope of the SML remains constant. How would this affect rM and ri
    1. Both rMand riwill decrease by 1%.
    2. Both rMand riwill remain the same.
    3. Both rMand riwill increase by 1%.
    4. rMwill remain the same and riwill increase by 1%.
    5. rMwill increase by 1% and riwill remain the same.
  3. Now suppose rRF decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri
    1. Both rMand riwill decrease by 1%.
    2. rMwill decrease by 1% and riwill remain the same.
    3. rMwill remain the same and riwill decrease by 1%.
    4. Both rMand riwill increase by 1%.
    5. Both rMand riwill remain the same.
     
  4. 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 riwill be %
  5. 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 riwill be %

Reference no: EM13861197

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