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please help me You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment
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You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient 0.3 A $160 million. B 120 million 1.2 C 80 million 2.3 D 80 million. 1.0 E 60 million 1.3 Kish's beta coefficient can be found as a weighted average of its stocks betas. The risk-free rate is 5%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -24% 0.2 0 0.4 11 0.2 30 0.1 52 a. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) I. = 5.5% + (8.3%) bi 5.0%+ (8.7%) bi II. III. n = 7.5% + (8.2%) b IV. n = 7.5% + (8.7%) bi V. = 5.0%+ (8.2%) bi -Select- O 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 15%, and its estimated beta is 1.5. Should Kish invest in the new company? The new stock -Select- obe purchased. At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places. % Step by Step Solution
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