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Suppose rRF = 4%, RM = 10%, and bi =1.4. a. What is ri, the required rate of return on Stock i? b. Now suppose that rRF (1) increases to 5% or (2) decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri? c. Now assume that rRF remains at 4% but rM(1) increases to 12% or (2) falls to 9%. The slope of the SML does not remain constant. How would these changes affect ri?

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