Required rate of return
Suppose rRF = 6%, rM = 12%, and bi = 1.6.
A) What is ri, the required rate of return on Stock i? Round your answer to two decimal places.
B) 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 two decimal places. The new ri will be?
C) 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 two decimal places. The new ri will be?