Suppose TRF = 4%, rM = 12%, and b = 1.9. 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 5%. The slope of the SML remains constant. How would this affect rm and n? 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 r will decrease by 1 percentage point. -Select- V 2. Now suppose TRF decreases to 3%. The slope of the SML remains constant. How would this affect rm and r? I. Both rm and r will increase by 1 percentage point. II. Both rm and r will remain the same. III. Both rm and r will decrease by 1 percentage point. IV. rM will decrease by 1 percentage point and r will remain the same. V. rM will remain the same and n will decrease by 1 percentage point. -Select- c. 1. Now assume that rRF remains at 4%, but rM increases to 13%. The slope of the SML does not remain constant. How would these changes affect n? Rounc your answer to one decimal place. The new r will be %. 2. Now assume that rRF remains at 4%, but rm falls to 11%. The slope of the SML does not remain constant. How would these changes affect n? Round you answer to one decimal place. The new n will be %.

Suppose rRF=4%,r1=12%, and bi=1.9. a. What is n, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose rne increases to 5%. The slope of the SML remains constant. How would this affect rM and n ? 1. Both rm and n will remain the same. II. Both rm and n will increase by 1 percentage point. III. n will remain the same and n will increase by 1 percentage point. IV. nM will increase by 1 percentage point and n will remain the same. V. Both m and n will decrease by 1 percentage point. 2. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and n ? 1. Both n and n will increase by 1 percentage point. 11. Both rM and n will remain the same. III. Both m and n will decrease by 1 percentage point. IV, n will decrease by 1 percentage point and n will remain the same. V.n will remain the same and n will decrease by 1 percentage point. c. 1. Now assume that rof remains at 4%, but m increases to 13%. The slope of the SML does not remain constant. How would these changes affect n ? Roun your answer to one decimal place. The new n will be \%. 2. Now assume that raf remains at 4%, but rM falls to 11%. The slope of the SML does not remain constant. How would these changes affect n ? Round you answer to one decimal place. The new n will be \%