Question: A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts AssetExpected Return (%)BetaResidual Standard Deviation (%) Stock

A portfolio manager summarizes the input from the macro and micro forecasters in the following table:

Micro Forecasts AssetExpected Return (%)BetaResidual Standard Deviation (%) Stock A 21 1.4 48 Stock B 18 1.8 66 Stock C 17 1.1 55 Stock D 12 1.0 50

Macro Forecasts AssetExpected Return (%)Standard Deviation (%) T-bills 8 0 Passive equity portfolio 16 23

a. Calculate expected excess returns, alpha values, and residual variances for these stocks. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place.)

b. Compute the proportion in the active portfolio and the passive index. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)

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