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

Micro Forecasts
Asset	Expected Return (%)	Beta	Residual Standard Deviation (%)
Stock A	24	1.00	50
Stock B	20	2.50	50

Macro Forecasts
Asset	Expected Return (%)	Standard Deviation (%)
T-bills	6	0
Passive Equity Portfolio (m)	12	20

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 %

Instruction: Enter your answer as a decimal number rounded to two decimal places for residual variances.

Residual variance of stock A

Residual variance of stock B

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))?

Whats the M² of the optimal portfolio?