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. Now suppose that the manager misestimates the beta of Waterworks stock, believing it to be 0.50 instead of 0.75. The standard deviation of the monthly market rate of return is 5%. Required: a. If he holds a $6 million portfolio of Waterworks stock and wishes to hedge market exposure for the next month using one-month maturity S\&P 500 futures contracts, what is the standard deviation of the (now improperly) hedged portfolio? The S\&P 500 currently at 3,000 and the contract multiplier is \$50. (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.) b. What is the probability of incurring a loss over the next month if the monthly market return has an expected value of 1% and a standard deviation of 5% ? (Do not round intermediate calculations. Round your percentage answer to 2 decimal places.) Futures Contracts Corn (CBT)-5,000 bu.; cents per bu. DocMrar20Soybeans(CBT)5,000bu;centsperbu.290.50295.50301.50287.00207.75204253007286.25 Soybeans (CBT)-5,000 bu; cents per bu. Navlar20SoybeanMeal(CBT)-100tons;92535138.00928.75941.00920.00932.00921.75034.25 DocJanzoSoybeanOIl(CBT)-60,000lbs;centsperllb.302.6030490303.40305.70301.6030390302.70305.10 DosJan20RoughPice(CBT)-2,000cut.31.8132.05$percott31.9632.1731.5331.7531.573170 Rough Rice (CBT)-2,000 cwt.; $ per cwt. Curency Futures Japanese Yen (CME)- 12,500,000;$ per 100% Cattlefeeder (CME)-50,000 bs.; cents per lb. Mini S\&P 500 (CME)-\$50 x index Lumber (CME)-110,000 bd. ft., $ per 1,000 bd. ft. Milk (CME)-200,000 lbs; cents per lb. DocVartiz0807.101501401613.00164.401595.601590.001502.401601.30 NavDoc20.1219.6320.3312.8120.0010.5620.3010.76.11.065.3674.75MinlRussell1000(CEM)-550indexine1635.90 Cocoa (ICE-US)-10 metric tons, $ per ton. DocMrar20Coffee(ICE-US)-37,500lbs;;centsperlb.2,4832,5032,4962,5132,4522,4832,4842,500