Question

REQUIRED RATE OF RETURN Suppose rE = 4%, r = 10%, and b, = 1.4.%3D a. What is r, the required rate of return on Stock i? b. Now suppose that r. (1) increases to 5% or (2) decreases to 3%. The slope of the SMLremains constant. How would this affect r,, and r.?RF c. Now assume that r remains at 4%, but r, (1) increases to 12% or (2) falls to 9%. The slope of the SML does not remain constant. How would these changes affect r,?RFM

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