Micro Forecasts Beta Asset Expected Return (%) Residual Standard Deviation (%) Stock A 20 1.00 60 Stock B 18 2.50 40 Macro Forecasts Expected Return (%) Asset Standard Deviation (%) T-bills 5 0...

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Extracted text: Micro Forecasts Beta Asset Expected Return (%) Residual Standard Deviation (%) Stock A 20 1.00 60 Stock B 18 2.50 40 Macro Forecasts Expected Return (%) Asset Standard Deviation (%) T-bills 5 0 Passive Equity Portfolio (m) 12 25 a. Calculate expected excess returns, alpha values, and residual variances for these stocks. Instruction: Enter your answer as a percentage (rounded to two decimal places) for expected excess returns and alpha values. Expected excess return on stock A Expected excess return on stock B Alpha of stock A Alpha of stock B 15 % 13 % 8% -4.5% Instruction: Enter your answer as a decimal number rounded to two decimal places for residual variances. Residual variance of stock A 0.36 Residual variance of stock B 16 Instruction: for part b, enter your response as a decimal number rounded to four decimal places. b. Suppose that the portfolio manager follows the Treynor-Black model, and constructs an active portfolio (p) that consists of the above two stocks. The alpha of the active portfolio (p) is -18%, and its residual standard deviation is 150%. What is the Sharpe ratio for the optimal portfolio (consisting of the passive equity portfolio and the active portfolio (p)? What's the M2 of the optimal portfolio?