You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks:

Stock

Investment

Stock's Beta Coefficient

A

$160 Million

0.5

B

120 Million

1.2

C

80 Million

1.8

D

80 Million

1.0

E

60 Million

1.6

Kish's beta coefficient can be found as a weighted average of its stock's 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

a.Calculate Kish's required rate of return.