Required return to universal toddler stock market conditions

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Reference no: EM131990084

As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 3%, rM = 13%, and bUT = 1.9.

a. Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places.

b. Now suppose rRF (1) increases to 4% or (2) decreases to 2%. The slope of the SML remains constant. How would this affect rM and rUT?

c. Now assume rRF remains at 3% but rM (1) increases to 15% or (2) falls to 12%. The slope of the SML does not remain constant. How would these changes affect rUT?

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Reference no: EM131990084

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