Transcribed Image Text
ou plan to invest inthe Kish Hedge Fund, which has total capital of $500 millioninvested in five stocks:StockInvestmentStock's BetaCoefficientA$160 million0.6B120 million1.1C80 million1.7D80 million1.0E60 million1.4Kish's betacoefficient can be found as a weighted average of its stocks'betas. The risk-free rate is 6%, and you believe the followingprobability distribution for future market returns isrealistic:ProbabilityMarketReturn0.1-26%0.200.4120.2320.150What is the equation forthe Security Market Line (SML)? (Hint: First determine the expectedmarket return.)ri = 6.0% +(7.6%)biri = 9.6% +(9.1%)biri = 6.0% +(9.0%)biri = 9.9% +(7.6%)biri = 9.9% +(9.0%)bi-Select-IIIIIIIVVCalculate Kish's requiredrate of return. Do not round intermediate calculations. Round youranswer to two decimal places.%Suppose Rick Kish, thepresident, receives a proposal from a company seeking new capital.The amount needed to take a position in the stock is $50 million,it has an expected return of 15%, and its estimated beta is 1.5.Should Kish invest in the new company?The new stock-Select-should notshould be purchased.At what expected rateof return should Kish be indifferent to purchasing the stock? Roundyour answer to two decimal places.%Assume that therisk-free rate is 3.5% and the required return on the market is 8%.What is the required rate of return on a stock with a beta of 3?Round your answer to two decimal places.