1. Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and B are 8.3% and 8.2%, respectively. The beta of A is .9, while that of B is 1.3. The T-bill rate is currently 4%, while the expected rate of return of the S&P 500 index is 8%. The standard deviation of portfolio A is 29% annually, while that of B is 50%, and that of the index is 39%.

a. If you currently hold a market index portfolio, what would be the alpha for Portfolios A and B? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.)

	Alpha
Portfolio A		%
Portfolio B		%

b-1. If instead you could invest only in bills and one of these portfolios, calculate the sharpe measure for Portfolios A and B. (Round your answers to 2 decimal places.)

	Sharpe Measure
Portfolio A
Portfolio B
2. Historical data suggest the standard deviation of an all-equity strategy is about 4.5% per month. Suppose the risk-free rate is now 1% per month and market volatility is at its historical level. What would be a maximum monthly fee to a perfect market timer, according to the Black-Scholes formula? (Round your answer to 2 decimal places.) Maximum monthly fee %