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fquty analyst you are concerned with whot will happen to the required retum for Universal Toddier's stock as market conditions change. Suppose nir = 5 sthe ne =10%, and ber = 1.1 a. Under current conokions, what is nyt, the requlred rate of return on UT stock? llound your answer to ane decimal place. b. 1. Non suppose ny increases to 6%. The market risk premium, MPy, (Lee, the slope of the SM.) remains constant. How would this alfect ne and hyr? 1. fy wil remain the same and fyr will increase by 1 percentage point. II. fr will increase try. 1 percentage point and rut will remain the same. III. Both nu and fir wit decrease by 1 percentage point. IV. Both fre and fur will remain the same. V. Both nu and fut will increase by 1 percentage point. 2. Now suppose nu decreases to 4\%. The market risk premium, ahis (1.e, the slope of the swi) remains constont. How would this alfect nu and rut? 1. Both ni and ry will remain the same. 11. Both rim and ny wal decrease by 1 percentage point. III, fa wul decrease by 1 pertentage point and hy will remwin the same. IV. nu wal reman the same and no will decrease by 1 percentage point. v. both ny and rur wis increase br 1 percentage point. 1. fye wil increase by 2.2 perbectage point. II. rut wal remain the same. III. nut will decrease br 2.2 parcentege point. 1. for wal decrease by 1.1 percentage point. 14. fy war femain the same. III. fyt will increase by 14 percentage point

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