Question: Suppose r RF = 6%, r M = 9%, and b i = 1.8. What is r i , the required rate of return on

Suppose rRF = 6%, rM = 9%, and bi = 1.8.

  1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place.
  2. Now assume that rRF remains at 6%, but rM increases to 10%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.
  3. Now assume that rRF remains at 6%, but rM falls to 8%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.

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