You have just graduated from college and plan to invest in MCB Arif Bank Fund, which has total of 500 million Pakistani reupees invested in five stocks:

Stock Investment Beta Nestle 80 million 0.8 Engro

110 million 1.2 ICI 160 million 1.5 Cheeko Ltd 80 million 1.0 Makkah Acc 70 million 1.8

The fund's beta can be found as a weighted average of its stock's beta. The risk free rate is 5% and you believe the following probability distribution for furture market returns is realistice:

Probability Market Return 0.1 -25% 0.2 0% 0.4 10% 0.2 30% 0.1 40%

a) What is the equation for the security market line (SML)? (hint: first determine the expected market return.)