REQUIRED RATE OF RETURN Suppose rr = 9%, ry = 14%, and b, = 1.3. a. What is r, the required rate of return on Stock i? 8-12 %3D b. Now that (1) increases to 10% or (2) decreases to 8%. suppose The slope of the SML remains constant. How would this affect r and r,? TRF c. Now assume that r, remains at 9%, but r,, (1) increases to 16% or (2) falls to 13%. The slope of the SML does not remain constant. HoW would these changes affect r,?
REQUIRED RATE OF RETURN Suppose rr = 9%, ry = 14%, and b, = 1.3. a. What is r, the required rate of return on Stock i? 8-12 %3D b. Now that (1) increases to 10% or (2) decreases to 8%. suppose The slope of the SML remains constant. How would this affect r and r,? TRF c. Now assume that r, remains at 9%, but r,, (1) increases to 16% or (2) falls to 13%. The slope of the SML does not remain constant. HoW would these changes affect r,?
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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![REQUIRED RATE OF RETURN Suppose rr = 9%, ry = 14%, and b, = 1.3.
a. What is r, the required rate of return on Stock i?
b. Now suppose that rE (1) increases to 10% or (2) decreases to 8%.
The slope of the SML remains constant. How would this affect r
and r?
8-12
Now assume that rp remains at 9%, but
(2) falls to 13%. The slope of the SML does not remain constant. How
would these changes affect r,?
C.
(1) increases to 16% or](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faa855f26-dbba-49e1-97b9-e8f0d72372d5%2F5073d6cb-9e03-4953-abf2-e719998f2281%2Fj3ugqe9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:REQUIRED RATE OF RETURN Suppose rr = 9%, ry = 14%, and b, = 1.3.
a. What is r, the required rate of return on Stock i?
b. Now suppose that rE (1) increases to 10% or (2) decreases to 8%.
The slope of the SML remains constant. How would this affect r
and r?
8-12
Now assume that rp remains at 9%, but
(2) falls to 13%. The slope of the SML does not remain constant. How
would these changes affect r,?
C.
(1) increases to 16% or
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