As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 4%, rM = 8%, and bUT = 1.3. Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places. % Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-IIIIIIIVVItem 2 I. rM will remain the same and rUT will increase by 1%. II. rM will increase by 1% and rUT will remain the same. III. Both rM and rUT will decrease by 1%. IV.Both rM and rUT will remain the same. V. Both rM and rUT will increase by 1%. Suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-VIVIIIIIIItem 3 I. Both rM and rUT will increase by 1%. II. Both rM and rUT will remain the same. III. Both rM and rUT will decrease by 1%. IV. rM will decrease by 1% and rUT will remain the same. V. rM will remain the same and rUT will decrease by 1%.
As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 4%, rM = 8%, and bUT = 1.3. Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places. % Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-IIIIIIIVVItem 2 I. rM will remain the same and rUT will increase by 1%. II. rM will increase by 1% and rUT will remain the same. III. Both rM and rUT will decrease by 1%. IV.Both rM and rUT will remain the same. V. Both rM and rUT will increase by 1%. Suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-VIVIIIIIIItem 3 I. Both rM and rUT will increase by 1%. II. Both rM and rUT will remain the same. III. Both rM and rUT will decrease by 1%. IV. rM will decrease by 1% and rUT will remain the same. V. rM will remain the same and rUT will decrease by 1%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 4%, rM = 8%, and bUT = 1.3.
- Under current conditions, what is rUT, the required
rate of return on UT Stock? Round your answer to two decimal places.
% - Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and rUT?
-Select-IIIIIIIVVItem 2
I. rM will remain the same and rUT will increase by 1%.
II. rM will increase by 1% and rUT will remain the same.
III. Both rM and rUT will decrease by 1%.
IV.Both rM and rUT will remain the same.
V. Both rM and rUT will increase by 1%. - Suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and rUT?
-Select-VIVIIIIIIItem 3
I. Both rM and rUT will increase by 1%.
II. Both rM and rUT will remain the same.
III. Both rM and rUT will decrease by 1%.
IV. rM will decrease by 1% and rUT will remain the same.
V. rM will remain the same and rUT will decrease by 1%. - Now assume rRF remains at 4% but rM increases to 10%. The slope of the SML does not remain constant. How would these changes affect rUT?
-Select-IIIIIIItem 4
I. rUT will increase by 2.6%.
II. rUT will remain the same.
III. rUT will decrease by 2.6%. - Assume rRF remains at 4% but rM falls to 7%. The slope of the SML does not remain constant. How would these changes affect rUT?
-Select-IIIIIIItem 5
I. rUT will increase by 1.3%.
II. rUT will remain the same.
III. rUT will decrease by 1.3%.
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