You plan to invest in a hedge fund, which has a total capital of R500 million invested in five types of shares.

Share	Investment	Share's Beta Coefficient
A	R160 million	0.5
B	120 million	1.2
C	80 million	1.8
D	80 million	1.0
E	60 million	1.6

The beta coefficient for the hedge fund can be found as weighted average of its shares betas. The risk-free rate is 6%, and you believe the following probability distribution for future market returns is realistic:

Probability	Market Return
0.1	-28%
0.2	0
0.4	12
0.2	30
0.1	50

Required:

1. Using market return data and the risk-free information, derive security market line (SML) equation for the hedge fund. (4)

2. Calculate the required rate of return for the hedge fund. (6)