The slope of the sml does not remain constant

Reference no: EM13861197

Suppose r_RF = 8%, r_M = 9%, and b_i = 1.3.

What is r_i, the required rate of return on Stock i? Round your answer to two decimal places. %
Now suppose r_RF increases to 9%. The slope of the SML remains constant. How would this affect r_M and r_i?
1. Both r_Mand r_iwill decrease by 1%.
2. Both r_Mand r_iwill remain the same.
3. Both r_Mand r_iwill increase by 1%.
4. r_Mwill remain the same and r_iwill increase by 1%.
5. r_Mwill increase by 1% and r_iwill remain the same.
Now suppose r_RF decreases to 7%. The slope of the SML remains constant. How would this affect r_M and r_i?
1. Both r_Mand r_iwill decrease by 1%.
2. r_Mwill decrease by 1% and r_iwill remain the same.
3. r_Mwill remain the same and r_iwill decrease by 1%.
4. Both r_Mand r_iwill increase by 1%.
5. Both r_Mand r_iwill remain the same.
Now assume that r_RF remains at 8% but r_M increases to 10%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.The new r_iwill be %
Now assume that r_RF remains at 8% but r_M falls to 8%. The slope of the SML does not remain constant. How would these changes affect r_i? Round your answer to two decimal places.The new r_iwill be %

Reference no: EM13861197

Questions Cloud

Explain the difference between interval and ratio data : Explain the difference between interval and ratio data

Explain whether australian currency is suitable to use : What are the five criteria necessary in order for a good to be suitable as a medium of exchange, and explain whether Australian currency is suitable to use as a medium of exchange.

Describe the purpose of ecumenical services : Describe the purpose of ecumenical services and interfaith initiatives. What importance, if any, does dialogue between the various faith traditions have

Analyze the different liability in this case : Analyze the different liability in this case if the sexual harasser were an independent contractor versus an employee

The slope of the sml does not remain constant : 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 %Now assume that rRF remains at 8% but rM falls to ..

Describe the data for each fund at the 3-year return : Listing of types of fund and their returns over a specific number of years. There are four types of funds - describe the data for each fund at the 3-year return

How prior research does or does not support your hypothesis : Turn in the proposed methods section for your research paper as well as your introduction and literature review.

Describe two to three features in a college''s financial : Describe two to three features in a college's financial management system that would enable it to be efficient, flexible, responsive, accountable, and empowering to employees? Identify two to three problem areas such an institution would have to over..

Explanation of how technology might help you reach your goal : explanation of how technology might help you reach your goals

User Account

All Pages