(a) Consider a portfolio worth 1 million dollars on January 3 2017, with 50% invested in SPY and 50% invested in FX. Calculate the approximate number of shares, n1,n2 which should be invested in each stock (use dividend-adjusted prices). Assuming that the number of shares remains constant thereafter, consider the value of the portfolio on October 23, 2018. Calculate the return of the portfolio over the time period. Show that this corresponds to 3, - 7',- 1,000,000 C o (b) Consider the same problem, but assume that the portfolio is rebalanced daily, so that the value of the positions in SPY and FXI are set to be equal (50%) each day (by buying/selling shares, correspondingly). Show that the return of this portfolio/trading strategy is T2 = (1,000,000) 1 1(1 + (0.5)Rsm(i) + (0.5)Ryn(i))-1 where Pxyz(i)-Pxyz(i 1) PXYZ (i-1) represents the daily return of stock XYZ and T is the number of trading days in the period. (Use adjusted prices to account for dividends, etc.). Compute numerically the return r2 (c) Compare r2 with ri. Which is larger? (a) Consider a portfolio worth 1 million dollars on January 3 2017, with 50% invested in SPY and 50% invested in FX. Calculate the approximate number of shares, n1,n2 which should be invested in each stock (use dividend-adjusted prices). Assuming that the number of shares remains constant thereafter, consider the value of the portfolio on October 23, 2018. Calculate the return of the portfolio over the time period. Show that this corresponds to 3, - 7',- 1,000,000 C o (b) Consider the same problem, but assume that the portfolio is rebalanced daily, so that the value of the positions in SPY and FXI are set to be equal (50%) each day (by buying/selling shares, correspondingly). Show that the return of this portfolio/trading strategy is T2 = (1,000,000) 1 1(1 + (0.5)Rsm(i) + (0.5)Ryn(i))-1 where Pxyz(i)-Pxyz(i 1) PXYZ (i-1) represents the daily return of stock XYZ and T is the number of trading days in the period. (Use adjusted prices to account for dividends, etc.). Compute numerically the return r2 (c) Compare r2 with ri. Which is larger