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 2.5% over the coming month. Beta Standard Deviation R-square of Residuals 0.65 0.08 (i.e., 8% monthly) 0.75 a-1. If he holds a $3 million portfolio of Waterworks stock, and wishes to hedge market exposure for the next month using 1-month maturity S&P 500 futures contracts, how many contracts should he enter? The S&P 500 currently is at 1,000 and the contract multiplier is $250. Answer is complete and correct. Number of contracts a-2. Should he buy or sell contracts? Sell Buy b. What is the standard deviation of the monthly return of the hedged portfolio? Answer is complete and correct. Standard &% deviation c. Assuming that monthly returns are approximately normally distributed, what is the probability that this market-neutral strategy will lose money over the next month? Assume the risk-free rate is 0.3% per month. (Do not round intermediate calculations. Enter your answer as percent rounded to 2 decimal places.) X Answer is complete but not Probability 39.178 %