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uppose 5%, TH 13%, and by-1.9. a. What is n, the required rate of return on Stock I? Round your answer to one decimal place. % b. 1. Now suppose Пr increases to 6%. The slope of the SML remains constant. How would this affect and n? 1. Both г and will increase by 1 percentage point. II. will remain the same and will increase by 1 percentage point. III. will increase by 1 percentage point and n will remain the same. IV. Both г and will decrease by 1 percentage point. V. Both г and will remain the same. -Select- 2. Now suppose FRF decreases to 4%. The slope of the SML remains constant. How would this affect and n? I. Both n and n will decrease by 1 percentage point. II. г will decrease by 1 percentage point and r, will remain the same. III. г will remain the same and r, will decrease by 1 percentage point. and IV. Both V. Both г and -Select- v will increase by 1 percentage point. will remain the same. c. 1. Now assume that rap remains at 5%, but гy Increases to 14%. The slope of the SML does not remain constant. How would these changes affect n? Round your answer to one decimal place. The new r will be %. 2. Now assume that far remains at 5%, but ry falls to 12%. The slope of the SML does not remain constant. How would these changes affect n? Round your answer to one decimal place.

uppose 5%, TH 13%, and by-1.9. a. What is n, the required rate of return on Stock I? Round your answer to one decimal place. % b. 1. Now suppose Пr increases to 6%. The slope of the SML remains constant. How would this affect and n? 1. Both г and will increase by 1 percentage point. II. will remain the same and will increase by 1 percentage point. III. will increase by 1 percentage point and n will remain the same. IV. Both г and will decrease by 1 percentage point. V. Both г and will remain the same. -Select- 2. Now suppose FRF decreases to 4%. The slope of the SML remains constant. How would this affect and n? I. Both n and n will decrease by 1 percentage point. II. г will decrease by 1 percentage point and r, will remain the same. III. г will remain the same and r, will decrease by 1 percentage point. and IV. Both V. Both г and -Select- v will increase by 1 percentage point. will remain the same. c. 1. Now assume that rap remains at 5%, but гy Increases to 14%. The slope of the SML does not remain constant. How would these changes affect n? Round your answer to one decimal place. The new r will be %. 2. Now assume that far remains at 5%, but ry falls to 12%. The slope of the SML does not remain constant. How would these changes affect n? Round your answer to one decimal place.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 7P
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Suppose 5%, TH 13%, and b₁ = 1.9. a. What is n, the required rate of return on Stock I? Round your answer to one decimal place. % b. 1. Now suppose mr increases to 6%. The slope of the SML remains constant. How would this affect and n? 1. Both г and will increase by 1 percentage point. II. г will remain the same and n will increase by 1 percentage point. III. will increase by 1 percentage point and n will remain the same. IV. Both г and n will decrease by 1 percentage point. -Select- V. Both г and will remain the same. 2. Now suppose гRF decreases to 4%. The slope of the SML remains constant. How would this affect and n? I. Both and will decrease by 1 percentage point. II. г will decrease by 1 percentage point and r, will remain the same. III. г will remain the same and r will decrease by 1 percentage point. IV. Both г and n will increase by 1 percentage point. -Select- V. Both г and will remain the same. c. 1. Now assume that RF remains at 5%, but г increases to 14%. The slope of the SML does not remain constant. How would these changes affect r? Round your answer to one decimal place. The new r will be %. 2. Now assume that RF remains at 5%, but г falls to 12%. The slope of the SML does not remain constant. How would these changes affect ? Round your answer to one decimal place. The new r will be %.
Transcribed Image Text:Suppose 5%, TH 13%, and b₁ = 1.9. a. What is n, the required rate of return on Stock I? Round your answer to one decimal place. % b. 1. Now suppose mr increases to 6%. The slope of the SML remains constant. How would this affect and n? 1. Both г and will increase by 1 percentage point. II. г will remain the same and n will increase by 1 percentage point. III. will increase by 1 percentage point and n will remain the same. IV. Both г and n will decrease by 1 percentage point. -Select- V. Both г and will remain the same. 2. Now suppose гRF decreases to 4%. The slope of the SML remains constant. How would this affect and n? I. Both and will decrease by 1 percentage point. II. г will decrease by 1 percentage point and r, will remain the same. III. г will remain the same and r will decrease by 1 percentage point. IV. Both г and n will increase by 1 percentage point. -Select- V. Both г and will remain the same. c. 1. Now assume that RF remains at 5%, but г increases to 14%. The slope of the SML does not remain constant. How would these changes affect r? Round your answer to one decimal place. The new r will be %. 2. Now assume that RF remains at 5%, but г falls to 12%. The slope of the SML does not remain constant. How would these changes affect ? Round your answer to one decimal place. The new r will be %.
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