Required Rate of Return

Suppose rRF = 8%, rM = 12%, and bi = 1.3.

What is ri, the required rate of return on Stock i? Round your answer to one decimal place. %

Now suppose rRF: (1) increases to 9% or (2) decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri? Round your answers to one decimal place. rRF increases to 9%: rM: %

ri: %

rRF decreases to 7%: rM: %

ri: %

Now assume that rRF remains at 6% but rM: (1) increases to 14% or (2) falls to 11%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answers to one decimal place. rM increases to 14%: %

rM decreases to 11%: %