1. The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 Index. A hedge fund manager believes that Waterworks is underpriced, with an alpha of 2% over the coming month.

Beta	R-square	Standard Deviation of Residuals
0.75	0.65	0.04 (i.e., 4% monthly)

b. Assuming that monthly returns are approximately normally distributed, what is the probability that this market-neutral strategy will lose money over the next month? Assume the risk-free rate is 0.7% per month. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.)

Probability %?

2. A hedge fund with $0.8 billion of assets charges a management fee of 2% and an incentive fee of 20% of returns over a money market rate, which currently is 3%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of: (Enter your answers in millions rounded to 1 decimal place.) Portfolio Rate of Return (%) Total fee ($million) Total Fee (%)

a. -2

b. 0

c. 3

d. 6

* I only need d. answered