Problem Walk-Through REQUIRED RATE OF RETURN Suppose rrr = 4%, r = 13%, and b; = 1.1. a. What is r, the required rate of return on Stock i? Round your answer to two decimal places. % b. 1. Now suppose rrf increases to 5%. The slope of the SML remains constant. How would this affect rm and ri? I. Both rm and ri will decrease by 1%. II. Both rm and ri will remain the same. III. Both rm and ri will increase by 1%. IV. rm will remain the same and r will increase by 1%. V. rm will increase by 1% and ri will remain the same. III 2. Now suppose rre decreases to 3%. The slope of the SML remains constant. How would this affect rm and m? I. Both rm and ri will decrease by 1%. II. rm will decrease by 1% and r will remain the same. III. rm will remain the same and r will decrease by 1%. IV. Both rm and ri will increase by 1%. V. Both rm and ri will remain the same. 1 II. rm will decrease by 1% and i will remain the same. III. rm will remain the same and will decrease by 1%. IV. Both rm and ri will increase by 1%. V. Both rm and i will remain the same. I C. 1. Now assume that rri remains at 4%, but r increases to 14%. The slope of the SML does not remain constant. How would these changes affect n? Round your answer to two decimal places. The new ri will be %. 2. Now assume that rRF remains at 4%, but im falls to 12%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to two decimal places. The new r will be % Hide Feedback Partially Correct