What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point.
What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point.
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
Related questions
Question
Suppose rRF = 6%, rM = 12%, and bi = 1.1.
- What is ri, the required
rate of return on Stock i? Round your answer to one decimal place.
%
- 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri?
- rM will remain the same and ri will increase by 1 percentage point.
- rM will increase by 1 percentage point and ri will remain the same.
- Both rM and ri will decrease by 1 percentage point.
- Both rM and ri will remain the same.
- Both rM and ri will increase by 1 percentage point.
2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri?
- rM will remain the same and ri will decrease by 1 percentage point.
- Both rM and ri will increase by 1 percentage point.
- Both rM and ri will remain the same.
- Both rM and ri will decrease by 1 percentage point.
- rM will decrease by 1 percentage point and ri will remain the same.
- 1. Now assume that rRF remains at 6%, but rM increases to 13%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.
The new ri will be %.
2. Now assume that rRF remains at 6%, but rM falls to 11%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.
The new ri will be %.
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