Question: A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Micro Forecasts Asset Expected Return (%) Beta Residual Standard

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

Micro Forecasts
Asset	Expected Return (%)		Beta	Residual Standard Deviation (%)
Stock A		22	0.9		52
Stock B		11	1.5		60
Stock C		10	0.6		54
Stock D		8	0.7		49

Macro Forecasts
Asset	Expected Return (%)		Standard Deviation (%)
T-bills		7		0
Passive equity portfolio		10		21

Calculate the following for a portfolio manager who is not allowed to short sell securities. The manager's Sharpe ratio is 0.2782. a. What is the cost of the restriction in terms of Sharpes measure? (Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places.)

b. What is the utility loss to the investor (A = 2.6) given his new complete portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

unconstrained =

constrained=

passive=

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