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You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five aces Steche Investment Steck'a Beta Cofident
You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five aces Steche Investment Steck'a Beta Cofident A $160 million 0.5 B 120 million BO million 1.7 BO milion 1.6 50 million 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 distribinion for future market returns is realistic: Probability Market Returns 0.1 -26% 0.2 0.4 11 0.2 28 0.1 51 a. What is the equation for the Security Market Une (SML)? (Hint: First determine the expected market return LG 4,0% + (8.5%), IL 4.5% + (7.6%) 4.0% + (9.396) IV. 6.0%+ (8.5%) V6.0%+ (9.3%) Select Culate kish's required rate of return. Do not round Intermediate calculations, Round your answer to two decimal places 96 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 6 $50 million, it has an expected return of 15%, and its estimated beta 1.4. Should Kish Invest in the new company The new stock -Select be purchased At what expected rate of return should Kish be indifferent to purchasing the stock Rosind your answer to two decimal places. 96
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