As an equity analyst you are concerned with what will


As an equity analyst you are concerned with what will happen to the required return to Universal Toddler Industries stock as market conditions change. Suppose rRF=5% rM =12% and bUTI = 14

A. Under the current conditions what is rUTI, the required rate of return on UTI Stock?

B. Now suppose rFR (1) increases to 6% or (2) decreases to 4%. The slope of the SMI remains constant. How would this affect rM and rUTI?

C. Now assume rFR remains at 5% but rM (1) increases to 14% or (2) falls to 11%. The slope of the SML does not remain constant. How would these changes affect rUTI?

YOU MUST SHOW ALL WORK IN DETAIL AND FORMULAS.

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Financial Management: As an equity analyst you are concerned with what will
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