9. Problem 8.21 (Security Market Line) eBook You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: A Stock Investment Stock's Beta Coefficient $160 million 0.7 B 120 million 1.4 80 million 2.2 D D 80 million 1.0 E 60 million 1.8 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 7%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -26% 0.2 0 0.4 12 0.2 28 0.1 55 a. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) I. r = 7.0% + (7.2%) II. r = 7.9% + (6.3%) III. n = 7.9% + (7.2%) IV. n = 7.0% + (6.3%) V. r - 11.0% + (5.4%) -Select- b. Calculate Kish's required rate of return. Do not round Intermediate calculations. Round your answer to two decimal places. % c. Suppose Rick Kish, the president, 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 14%, and its estimated beta is 1.5. Should Kish invest in the new company? The new stock -Select- be purchased. At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places. %