REQUIRED RATE OF RETURN Suppose rRF = 8%, rM = 13%, and bi = 1.2. What is ri,...

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REQUIRED RATE OF RETURN
Suppose r_RF = 8%, r_M = 13%, andb_i = 1.2.
What is r_i, the required rate of return on Stock i?Round your answer to two decimal places.
%
1. Now suppose r_RF increases to 9%. The slope of theSML remains constant. How would this affect r_M andr_i?
Both r_M and r_i will decrease by 1%.
Both r_M and r_i will remain the same.
Both r_M and r_i will increase by 1%.
r_M will remain the same and r_i willincrease by 1%.
r_M will increase by 1% and r_i will remainthe same.
2. Now suppose r_RF decreases to 7%. The slope of theSML remains constant. How would this affect r_M andr_i?
r_M will decrease by 1% and r_i will remainthe same.
r_M will remain the same and r_i willdecrease by 1%.
Both r_M and r_i will increase by 1%.
Both r_M and r_i will remain the same.
Both r_M and r_i will decrease by 1%.
1. Now assume that r_RF remains at 8%, butr_M increases to 14%. The slope of the SML does notremain constant. How would these changes affect r_i?Round your answer to two decimal places.
The new r_i will be %.
2. Now assume that r_RF remains at 8%, butr_M falls to 12%. The slope of the SML does not remainconstant. How would these changes affect r_i? Round youranswer to two decimal places.
The new r_i will be %.

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REQUIRED RATE OF RETURNSuppose rRF = 8%, rM = 13%, andbi = 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 theSML remains constant. How would this affect rM andri?Both rM and ri will decrease by 1%.Both rM and ri will remain the same.Both rM and ri will increase by 1%.rM will remain the same and ri willincrease by 1%.rM will increase by 1% and ri will remainthe same.2. Now suppose rRF decreases to 7%. The slope of theSML remains constant. How would this affect rM andri?rM will decrease by 1% and ri will remainthe same.rM will remain the same and ri willdecrease by 1%.Both rM and ri will increase by 1%.Both rM and ri will remain the same.Both rM and ri will decrease by 1%.1. Now assume that rRF remains at 8%, butrM increases to 14%. The slope of the SML does notremain 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%, butrM falls to 12%. The slope of the SML does not remainconstant. How would these changes affect ri? Round youranswer to two decimal places.The new ri will be %.