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What is ri, the required rate of return on Stock i? Round your answer to one decimal place.   % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?   rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point.

What is ri, the required rate of return on Stock i? Round your answer to one decimal place.   % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?   rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point.

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 rRF = 6%, rM = 12%, and bi = 1.1.

    1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place.

        %

    2. 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?

       

      1. rM will remain the same and ri will increase by 1 percentage point.
      2. rM will increase by 1 percentage point and ri will remain the same.
      3. Both rM and ri will decrease by 1 percentage point.
      4. Both rM and ri will remain the same.
      5. Both rM and ri will increase by 1 percentage point.

       

       

2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri?

 

      1. rM will remain the same and ri will decrease by 1 percentage point.
      2. Both rM and ri will increase by 1 percentage point.
      3. Both rM and ri will remain the same.
      4. Both rM and ri will decrease by 1 percentage point.
      5. rM will decrease by 1 percentage point and ri will remain the same.

 

 

  1. 1. Now assume that rRF remains at 6%, but rM increases to 13%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.

    The new ri will be   %.

    2. Now assume that rRF remains at 6%, but rM falls to 11%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.

    The new ri will be   %.

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