1. Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. %
2. 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 1.4. Should Kish invest in the new company? The new stock -Select. -should??????? should not?????? be purchased. At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places. %

SECURITY MARKET LINE 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 $160 million ' 120 million ' 80 million 80 million 6 60 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 distribution for future market returns is realistic: Probability Market Return (7%) N N 7 a. What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) I. r = 3.6% + (7.4%)bi II. n = 4.0% + (6.3%) III. r = 3.4% + (6.2%)bi IV. n = 3.4% + (6.3%) V. 1 = 4.0% + (6.2%)bi