8-12. Required Rate of Return Suppose rRf = 9%, rm = 14%, and bi = 1.3. a.
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8-12. Required Rate of Return Suppose rRf = 9%, rm = 14%, and bi = 1.3.
a. What is ri, the required rate of return on Stock i?
b. Now suppose that rRF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect rM and ri?
c. Now assume that rRF remains at 9%, but rM (1) increases to 16% or (2) falls to 13%. The slope of the SML does not remain constant. How would these changes affect ri?
Related Book For
Financial management theory and practice
ISBN: 978-0324422696
12th Edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
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