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You plan to invest in the Kish Hedge Fund, which has total capital of exist500 million invested in five stocks: Kish's beta coefficient can be
You plan to invest in the Kish Hedge Fund, which has total capital of exist500 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)? b. Calculate Kish's required rate of return. c. Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is exist50 million, it has an expected return of 15%, and its estimated beta is 1.5. Should Kish invest in the new company? At what
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