1. You plan to invest in K a fund which has a total capital of RM500 million invested in 5 stocks as given below: Stock Stock Beta A 0.5 B 2.0 4.0 D 1.0 E 3.0 The risk free rate of return is 6 percent and the probability distribution of future market returns is given as follows: Probability Market Return 0.1 0.2 0.4 0.2 0.1 Investment RM160 mil 120 mil 80 mil 80 mil 60 mil 7% 9 11 13 15 (a) Estimate the Security Market Line for K funds. (b) Estimate the required of return on K funds. (c) Suppose there is a new potential investment to be made by K funds worth RM50 million and has an expected return of 15 percent with a beta of 2.0. Should K funds make the investment? At what expected rate of return would K funds be indifferent to making the investment