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(--) O A https:/ Chapter 26 Homework Set 2 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 21% over the coming month 10 Standard Deviation of Residuals 0.1 (i.e., 10% monthly) Beta R-square 1.4 0.65 a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as deviation of the portfolio? (Round your answer to 1 decimal place.) ReferencesWaterworks. Assume the residual returns on each of these stocks are independent of each other. What is the residual standard b. Calculate the probability of a loss on a market-neutral strategy involving equaly weighted, market-hedged positions in the 100 stocks over the next month. Assume the risk-free rate is 0.2% per month. (Do not round intermediate calculations. Enter your answer as percent rounded to 5 decimal places.) of a loss