A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Asset Stock A Stock B Stock C Stock D Micro Forecasts Expected Return (%) 27 24 23 18 Beta 1.6 1.9 1.0 1.0 Residual Standard Asset T-bills Passive equity portfolio Deviation (8) 62 Macro Forecasts 73 62 57 Expected Return (8) 14 22 Standard Deviation 0 24 Required: a. Calculate expected excess returns, alpha values, and residual variances for these stocks. b. Compute the proportion in the active portfolio and the passive index. c. What is the Sharpe ratio for the optimal portfolio? d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? e. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.1?

Complete this question by entering your answers in the tabs below. Calculate expected excess returns, alpha values, and residual variances for these stocks. Note: Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round "Alpha values" to 1 decimal place. Calculate using numbers in decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%. Complete this question by entering your answers in the tabs below. Compute the proportion in the active portfollo and the passive index. Note: Negative values should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places. Calculate using numbers in decimal form, not percentages. For example use "20" for calculation if standard deviation is provided as 20%. A portfolio manager summarizes the input from the macro and micro forecasters in the following table: Required: a. Calculate expected excess returns, alphe values, and residual variances for these stocks. b. Compute the proportion in the active portfolio and the passive index. c. What is the Sharpe ratio for the optimal portfolio? d. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely possive index strategy? e. What should be the exact makeup of the complete portfollo (including the risk-free asset) for an investor with a coefficient of risk aversion of 31 ? Complete this question by entering your answers in the tabs below. What is the Sharpe ratio for the optimal portfolio? Note: Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places. Calculate using numbers decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%. Complete this question by entering your answers in the tabs below. By how much did the position in the active portfolio improve the Sharpe ratio compared to a purely passive index strategy? Note: Do not round intermediate calculations. Enter your answer as decimals rounded to 4 places. Calculate using numbers in decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%. Complete this question by entering your answers in the tabs below. What should be the exact makeup of the complete portfolio (including the risk-free asset) for an investor with a coefficient of risk aversion of 3.1 ? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Calculate using numbers in decimal form, not percentages. For example use " 20 " for calculation if standard deviation is provided as 20%