(Security market line) James fromholiz is considering whether to invest in a newly formed investment fund. The funds investment objective is to acquire home mortgage securties at what it hopes wil be bargain prices. The fund sponsor has suggested toulames that the fouds performance wit hinge on how the national cconomy performs in the coming year. Specifcally, he suggested the following possible outcomes James has estimated the expected rate of return from this investment is 21.00 percent James wants to apply his recently acquired understanding of the secunty market ine concept to his anatysis 3. If the nsk-free rate of interest is cunently 22 percent and the beta for the investment is 27 , what is the stope of the 5 ecunty market ine for the feat estati mortaige security imestment? b. James is also considering the investment of his money in a market index fund that has an expected rate of return of 9 percent What is the siope of the security market line (i.e, the reward-to-nsk ratio) for this investment opportunity? c. Based on your analysis of parts a and b above, which investment shoukd James take? Why? \begin{tabular}{lcc} \hline State of Economy & Probability & Fund Returns \\ Rapid expansion and recovery & 15% & 100% \\ Modest growth & 35% & 40% \\ Continued recession & 35% & 20% \\ Falls into depression & 15% & 100% \\ \hline \multicolumn{2}{c}{ (Click on the icon in order to copy its contents into a spreadsheet.) } \end{tabular}