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. Standard Deviation of Residuals 06 (i.e., 6% monthly) 75 65 a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as Waterworks. Assume the residual returns (the e terms in Equations 20.1 and 20.2) on each of these stocks are independent of each other. What is the residual standard deviation of the porttolio? (Round your answer to 2 decimal places.) Residual standard deviation b. Recalculate the probability of a loss on a market neutral strategy nvo ng equally weighted, market hedged positions in the 100 stocks over the next month. Assume the nsk-free rate s 5% per month. (Do not round intermediate calculations. Round your answer to 5 decimal places.) Probability of a loss 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. Standard Deviation of Residuals 06 (i.e., 6% monthly) 75 65 a. Suppose you hold an equally weighted portfolio of 100 stocks with the same alpha, beta, and residual standard deviation as Waterworks. Assume the residual returns (the e terms in Equations 20.1 and 20.2) on each of these stocks are independent of each other. What is the residual standard deviation of the porttolio? (Round your answer to 2 decimal places.) Residual standard deviation b. Recalculate the probability of a loss on a market neutral strategy nvo ng equally weighted, market hedged positions in the 100 stocks over the next month. Assume the nsk-free rate s 5% per month. (Do not round intermediate calculations. Round your answer to 5 decimal places.) Probability of a loss