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

Stocks Investments 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 stocks' betas. The risk-free rate is 6%, and you believe the following probabliliy distrbution for future market return is realistic

Probability Market Return

0.1	-28%
0.2	0
0.4	12
0.2	30
0.1	50

A. What is the equation for the Security Market Line?

B. Calculate Kish's required rate of return

C. Suppose Rick Kish, the president, receives a proposal from a company seeking bew capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.5. Should Kish invest in the new company? At what expected rate of return should Kish be indifferent to purchasing the stock?