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 $4\%,$ and you believe the following probability distribution for future

market returns is realistic:

Probability Market Return

a$.$ What is the equation for the Security Market Line $($SML$)?($Hint: First determine the expected market return.$)$

I. $r_i=4\mathrm{.}6\%+(9\mathrm{.}1\%)b_i$

II$.r_i=4\mathrm{.}6\%+(8\mathrm{.}9\%)b_i$

III. $r_i=4\mathrm{.}0\%+(9\mathrm{.}1\%)b_i$

IV$.r_i=4\mathrm{.}7\%+(9\mathrm{.}0\%)b_i$

V$.r_i=4\mathrm{.}0\%+(8\mathrm{.}9\%)b_i$

b$.$ Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

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 $$50$ million, it

has an expected return of $14\%,$ and its estimated beta is $1\mathrm{.}5.$ Should Kish invest in the new company?

The new stock

$|$ be purchased.

At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places.

$\%$