The required rate of return on uti stock

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As an equity analyst you are concerned with what will happen to the required return to Universal Toddler industries stock as market conditions change suppose rRF=5%,rM=12% and buTT=1.4.

Under current conditions, what is RuTI? The required rate of return on UTI stock?

Now suppose rRF (1) increase to 6% 0r (2) decrease to 4% the Slope of the SMI. Remains constant. How would this affect rM and RUN?

Now Assume rRF remains at 5% but RM (1) increases to 14% or (2) falls to 11%. The shope of the SMI does not remain constant. How would these changes affect rUN?

Reference no: EM13783218

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