5. Problem 8.12 (Required Rate of Return) eBook Problem Walk-Through Suppose RF = 5%, M = 11%, and bi = 1.4. a. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose FRF increases to 6%. The slope of the SML remains constant. How would this affect and ri? I. r will increase by 1 percentage point and ri will remain the same. II. Both and ri will decrease by 1 percentage point. III. Both and r will remain the same. IV. Both and ri will increase by 1 percentage point. V. m will remain the same and ri will increase by 1 percentage point. -Select- 2. Now suppose RF decreases to 4%. The slope of the SML remains constant. How would this affect rm and ri? I. Both r and ri will decrease by 1 percentage point. II. M will decrease by 1 percentage point and r; will remain the same. III. r will remain the same and r; will decrease by 1 percentage point. IV. Both and ri will increase by 1 percentage point. V. Both and ri will remain the same. -Select- c. 1. Now assume that RF remains at 5%, but r increases to 12%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new ri will be %. 2. Now assume that RF remains at 5%, but falls to 10%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new ri will be %.