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 2.4% over the coming month. Beta R-square Standard Deviation of Residuals 0.75 0.65 0.1 (i.e., 10% monthly)

b. What is the standard deviation of the monthly return of the hedged portfolio?

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 0.5% per month. (Enter your answer as percent rounded to 2 decimal places, e.g., enter "12.53%" and not "0.1253.")