but $=1\mathrm{.}7.$

a$.$ Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to one decimal place.

$\%$

I. Both $r_M$ and rut will remain the same.

II$.$ Both $r_M$ and rUT will increase by $1$ percentage point.

III. $r_M$ will remain the same and rUt will increase by $1$ percentage point.

IV$.r_M$ will increase by $1$ percentage point and rut will remain the same.

V$.$ Both $r_M$ and rut will decrease by $1$ percentage point.

$-$Select$-$

Now suppose rRF decreases to $6\%.$ The market risk premium, RPM$,($i$.$e$.,$ the slope of the SML$)$ remains constant. How would this affect rM and rut?

I. Both $r_M$ and rut will remain the same.

II$.$ Both $r_M$ and rut will decrease by $1$ percentage point.

III. $r_M$ will decrease by $1$ percentage point and rut will remain the same.

IV$.r_M$ will remain the same and rUT will decrease by $1$ percentage point.

V$.$ Both $r_M$ and rUT will increase by $1$ percentage point.

changes affect rut?

I. rUT will increase by $3\mathrm{.}4$ percentage point.

II$.$ rut will remain the same.

III. rUT will decrease by $3\mathrm{.}4$ percentage point.

changes affect rUT?

I. rut will remain the same.

II$.$ rUT will decrease by $1\mathrm{.}7$ percentage point.

III. rUT will increase by $1\mathrm{.}7$ percentage point.