Question: Suppose r RF = 4%, r M = 10%, and b i = 1 4. a. What is ri, the required rate of return on

Suppose r_RF = 4%, r_M = 10%, and b_i = 1 4.
a. What is ri, the required rate of return on Stock i?
b. Now suppose that r_RF (1) increases to 5% or (2) decreases to 3%. The slope of the SML remains constant. How would this affect r_M and r_i?
c. Now assume that r_RF remains at 4%, but r_M (1) increases to 12% or (2) falls to 9%. The slope of the SML does not remain constant. How would these changes affect r_i?

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