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  3. 1) required rate of return. suppose trf = 9%, im =

1) Required rate of return. Suppose TRF = 9%, IM = 14%, and b =...

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Accounting

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1) Required rate of return. Suppose TRF = 9%, IM = 14%, and b = 1.3. a) What is ri, the required rate of return on Stock i? (15.5%) b) Now suppose TRF (1) increases to 10 percent or (2) decreases to 8 percent. The slope of the SML remains constant. How would this affect TM and r? (15%, 16.5%; 13%, 14.5%) c) Now assume TRF remains at 9 percent but M (1) increases to 16 percent or (2) falls to 13 percent. The slope of the SML does not remain constant. How would these changes affect r? (18.1%; 14.2%)

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