Question: Suppose rRF = 8%, rM = 12%, and bi = 1.8. a. What is ri , the required rate of return on Stock i? Round

Suppose rRF = 8%, rM = 12%, and bi = 1.8. a. What is ri , the required rate of return on Stock i? Round your answer to two decimal places. % b. Now suppose rRF (1) increases to 9%. The slope of the SML remains constant. How would this affect rM and ri ? I. rM will remain the same and ri will increase by 1%. II. rM will increase by 1% and ri will remain the same. III. Both rM and ri will decrease by 1%. IV.Both rM and ri will remain the same. V. Both rM and ri will increase by 1%. c. Now suppose rRF (2) decreases to 7%. The slope of the SML remains constant. How would this affect rM and ri ? I. Both rM and ri will decrease by 1%. II. rM will decrease by 1% and ri will remain the same. III. rM will remain the same and ri will decrease by 1%. IV. Both rM and ri will increase by 1%. V. Both rM and ri will remain the same

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