Before given you more money to invest, you are given $100,000 at the end of the year. Your holding period for this investment is one-year. You are restricted to the following investment alternatives, shown with their probabilities and associated outcomes.

Write out the security market line (SML) equation, use it to calculate the required rate of return on each alternative, and then graph the relationship between the expected and required rates of return.

Returns on Investments Estimated Rate of Return Market State of the T- FSU UMD WYU 2-stock portfolio portfolio Ind prob Bills Tech Farm economy Recession 0.1 8.0% -22.0% 28.0% 10.0% -13.0% 3.0% Below avg 0.2 8.0 -2.0 14.7 -10.0 1.0 8.0 7.0 15.0 Average 0.4 20.0 0.0 10.0 Above avg 0.2 8.0 35.0 -10.0 45.0 29.0 8.0 15.0 oom 0.1 50.0 -20.0 30.0 43.0 r-hat ( 1.7% 13.8% 15.0% Std dev (a) 0.0 13.4 18.8 15.3 Coef of var (cv) 1.4 7.9 1.0 beta (b) -0.86 0.68