Suppose TRF = 3%, rm = 13%, and bi 1.3. a. What is ri, the required...

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Suppose TRF = 3%, rm = 13%, and bi 1.3. a. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. b. 1. Now suppose TRF increases to 4%. The slope of the SML remains constant. How would this affect rm and ri? I. Both rm and r¡ will remain the same. II. Both rm and r¡ will increase by 1 percentage point. III. rm will remain the same and r¡ will increase by 1 percentage point. IV. rm will increase by 1 percentage point and r¡ will remain the same. V. Both rm and ri will decrease by 1 percentage point. II % 2. Now suppose TRF decreases to 2%. The slope of the SML remains constant. How would this affect r and r₁? I. rm will decrease by 1 percentage point and r₁ will remain the same. II. rm will remain the same and r¡ will decrease by 1 percentage point. III. Both rm and r₁ will increase by 1 percentage point. IV. Both rm and r¡ will remain the same. V. Both rm and r¡ will decrease by 1 percentage point. V c. 1. Now assume that rRF remains at 3%, but rè increases to 14%. The slope of the SML does not remain constant. How would these changes affect r₁? Round your answer to one decimal place. The new ri will be %. 2. Now assume that rRF remains at 3%, but rm falls to 12%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new r₁ will be %. Suppose TRF = 3%, rm = 13%, and bi 1.3. a. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. b. 1. Now suppose TRF increases to 4%. The slope of the SML remains constant. How would this affect rm and ri? I. Both rm and r¡ will remain the same. II. Both rm and r¡ will increase by 1 percentage point. III. rm will remain the same and r¡ will increase by 1 percentage point. IV. rm will increase by 1 percentage point and r¡ will remain the same. V. Both rm and ri will decrease by 1 percentage point. II % 2. Now suppose TRF decreases to 2%. The slope of the SML remains constant. How would this affect r and r₁? I. rm will decrease by 1 percentage point and r₁ will remain the same. II. rm will remain the same and r¡ will decrease by 1 percentage point. III. Both rm and r₁ will increase by 1 percentage point. IV. Both rm and r¡ will remain the same. V. Both rm and r¡ will decrease by 1 percentage point. V c. 1. Now assume that rRF remains at 3%, but rè increases to 14%. The slope of the SML does not remain constant. How would these changes affect r₁? Round your answer to one decimal place. The new ri will be %. 2. Now assume that rRF remains at 3%, but rm falls to 12%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new r₁ will be %.

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a To calculate ri the required rate of return on Stock i we can use the formula ri ... View the full answer