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this is the full question 5. You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five
this is the full question
5. You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 6%, and you believe the following probability distribution for future market returns is realistic: 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 F seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected retum of 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 Step by Step Solution
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