Suppose r RF =9%, r M =14%, and b i =1.3. a) What is r i ,

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Suppose r_RF=9%, r_M=14%, and b_i=1.3.

a) What is r_i, the required rate of return on Stock i ?

b) Now suppose that r_RF (1) increases to 10% or (2) decreases to 8%. The slope of the SML remains constant. How would this affect r_M and r_i ?

c) Now assume that r_RF remains at 9% but r_M (1) increases to 16% or (2) falls to 13%. The slope of the SML does not remain constant. How would these changes affect r_i ?

Related Book For answer-question

International Financial Management

ISBN: 978-0132162760

2nd edition

Authors: Geert Bekaert, Robert J. Hodrick

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Posted Date: Aug 29, 2020 09:00 AM

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Suppose r RF =9%, r M =14%, and b i =1.3. a) What is r i ,

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a ri rRF rM rRF bi ri 9 14 9 13 155 b r RF 1 increases to 10 ri 10 14 10 13 152 2 decreases t... View the full answer

International Financial Management

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