# Required Rate of Return on Stock Assignment | Homework For You

Suppose rRF = 4%, rM = 10%, and bi = 1.2.

1. What is ri, the required rate of return on Stock i? Round your answer to one decimal place.  % 2. 1. Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and ri?
1. Both rM and ri will increase by 1 percentage point.
2. rM will remain the same and ri will increase by 1 percentage point.
3. rM will increase by 1 percentage point and ri will remain the same.
4. Both rM and ri will decrease by 1 percentage point.
5. Both rM and ri will remain the same
3. 2. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri?
1. rM will decrease by 1 percentage point and ri will remain the same.
2. rM will remain the same and ri will decrease by 1 percentage point.
3. Both rM and ri will increase by 1 percentage point.
4. Both rM and ri will remain the same.
5. Both rM and ri will decrease by 1 percentage point.
4. 1. Now assume that rRF remains at 4%, but rM increases 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   %.

2. Now assume that rRF remains at 4%, but rM falls to 9%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place.