Suppose rRF = 5%. rM = 13%. and bi= 1.7. What is ri the required rate of return

Question

Suppose rRF = 5%. rM = 13%. and bi= 1.7. What is ri the required rate of return on Stock i? Round your answer to two decimal places. % Now suppose rRF increases to 6%. The slope of the SML remains constant. How would this affect rM and ri? rM will increase by 1% and ri will remain the same. 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 will increase by 1%. Now suppose rRF decreases to 4%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will decrease 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%. rM will decrease by 1% and ri will remain the same. Now assume that rRF remains at 5% but rM increases to 14%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places. The new ri will be

Explanation / Answer

a. 18.6%

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