Suppose that the alpha forecasts in row 39 of Spreadsheet 8.1 are doubled. All the other data remain the same.

a. Use the Summary of Optimization Procedure to estimate back-of-the-envelope calculations of the information ratio and Sharpe ratio of the newly optimized portfolio.

b. Now recalculate the entire spreadsheet example, find the optimal risky portfolio, and verify your back-of-the-envelope calculation. P-968