6. Problem 6-08 (Required Rate of Return) eBook H Problem Walk-Through Required Rate of Return As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose RF = 3%, IM = 10%, and bUT = 1.6. a. Under current conditions, what is PUT, the required rate of return on UT Stock? Round your answer to one decimal place. % b 1. Now suppose RF increases to 4%. The slope of the SML remains constant. How would this affect rM and rut? I. I'M will remain the same and rUT will increase by 1 percentage point. II. I'M will increase by 1 percentage point and rUT will remain the same. III. Both I'M and UT will decrease by 1 percentage point. IV. Both rM and rUT will remain the same. V. Both IM and PUT will increase by 1 percentage point. -Select- 4 2. Now suppose rRF decreases to 2%. The slope of the SML remains constant. How would this affect rM and rut? I. Both I'M and rUT will increase by 1 percentage point. II. Both IM and rUT will remain the same. III. Both IM and PUT will decrease by 1 percentage point. IV. IM will decrease by 1 percentage point and ruT will remain the same. V. IM will remain the same and rUT will decrease by 1 percentage point. -Select- : C. 1. Now assume rRF remains at 3% but IM increases to 12%. The slope of the SML does not remain constant. How would these changes affect rUT? I. PUT will remain the same. II. PUT will increase by 3.2 percentage point. III. PUT will decrease by 3.2 percentage point. -Select- : 2. Now assume rRF remains at 3% but IM falls to 9%. The slope of the SML does not remain constant. How would these changes affect rut? I. PUT will decrease by 1.6 percentage point. II. PUT will remain the same. III. PUT will increase by 1.6 percentage point. -Select- +