Question: 12) Suppose rRF = 9%, rM = 14%, and bi =1.3 a) what is the ri, the required rate of return on stock i? b)

12) Suppose rRF = 9%, rM = 14%, and bi =1.3

a) what is the ri, the required rate of return on stock i?

b) Now suppose that rRF (1) increases to 10% and (2) decreases to 8%. The slope of 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?

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