PLEASE ANSWER ALL QUESTIONS

A portfolio manager summarizes the input from the macro and micro forecasters in the

following table:

Macro Forecasts

a$.$ Calculate expected excess returns, alpha, and residual variance for these stocks.

b$.$ Construct optimal risky portfolio

c$.$ What is Sharpe's measure for the optimal portfolio and how much of it is

contributed by the active portfolio?

d$.$ What should be the exact makeup of the complete portfolio for an investor with

a coefficient of risk aversion of $2\mathrm{.}8?$