ignore question 6 i forgot to crop the screenshot

5. You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Beta $160 million 0.5 B 120 million 1.2 80 million 1.8 D 80 million 1.0 60 million 1.6 Kish's beta coefficient can be found as a weighted average of its stocks" betas. The risk-free rate is 6% and you believe that following probability distribution for future market returns is realistic: Probability Market Return 0.1 -28% 0.2 0 0.4 12 0.2 30 50 a. What is the equation for the Security Market Line (SML)? (Hint: First, determine the expected market return) b. Calculate Kish's required rate of return. 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 0.1 15% and its estimated beta is 1.5. Should Kish invest in the new company? At what expected rate of return should Kish be indifferent to purchasing the stock? 6. Stock A has the following probability distribution of expected returns. What is Stock A's expected rate of return and standard deviation? Probability Rate of Return -12% 0.1 0.2 0.4 0.2 0 5 8 22 0.1