The investment fund manager has a total capital of $500 million invested in five stocks:

Stock	A	B	C	D	E
Investment ($millions)	160	120	80	80	60
Beta	0.5	2.0	4.0	1.0	3.0

The current risk-free rate is 6%, whereas the likely market returns for the next period is:

Market return (%)	7	9	11	13	15
Probability	0.1	0.2	0.4	0.2	0.1

a.Estimate the security market line (SML) equation,

b.Calculate the funds managers required rate of return for the next period,

c.Would an additional investment of $50 million with expected return of 15% and likely beta of 2.0 be worthwhile to the manager?

d.At what rate of return would the manager be indifferent to purchase the stock as in (c) above?