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 $0\mathrm{.}6$

B $120$ million $1\mathrm{.}5$

C $80$ million $1\mathrm{.}7$

D $80$ million $1\mathrm{.}0$

E $60$ million $1\mathrm{.}6$

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk$-$free rate is $3\%,$ and you believe the following probability distribution for future market returns is realistic:

Probability Market Return

$0\mathrm{.}1-30\%$

$0\mathrm{.}20$

$0\mathrm{.}411$

$0\mathrm{.}230$

$0\mathrm{.}153$

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

ri $=4\mathrm{.}1\%+(9\mathrm{.}7\%)$bi

ri $=4\mathrm{.}1\%+(9\mathrm{.}0\%)$bi

ri $=3\mathrm{.}0\%+(9\mathrm{.}7\%)$bi

ri $=4\mathrm{.}5\%+(10\mathrm{.}0\%)$bi

ri $=3\mathrm{.}0\%+(9\mathrm{.}0\%)$bi

$-$Select$-$

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

$\%$

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 $16\%,$ and its estimated beta is $1\mathrm{.}4.$ 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? Round your answer to two decimal places.

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

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

I. $r_i=4\mathrm{.}1\%+(9\mathrm{.}7\%)b_i$

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

III. $r_i=3\mathrm{.}0\%+(9\mathrm{.}7\%)b_i$

$IV.r_i=4\mathrm{.}5\%+(10\mathrm{.}0\%)b_i$

$V.r_i=3\mathrm{.}0\%+(9\mathrm{.}0\%)b_i$

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

$\%$

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.