Question 3 [15 marks in total] Portfolio X, a CPPI portfolio, has a floor value of $8 million, a market value of $10 million, and a multiplier of 2. The portfolio is rebalanced annually. Portfolio Y, a constant mix strategy of 40% stocks and 60% bonds, has a market value of $10 million. This portfolio is also rebalanced annually. a) Calculate the initial amount of stock investment in each portfolio. (4 marks) b) Currently, the stock market is up and bond market is down. If you expect the current trend will last for a few more years, which portfolio should you choose? Explain in details. (3 marks) ******************* x] Bookl - Excel P3 NetSupport School Untitled Paint Fortron ACP ly).pdf c) If the stock market performed as you expected. In the first year, stocks indeed increased by 20% and bonds decreased by 10%. In the second year, stocks increased by 10% and bonds decreased by 5%. Determine the amount of investment for stocks and bonds respectively for the portfolio you choose in b) at the end of first year and second year after rebalancing (8 marks) I.. Page 7 of 11 Booki - Excel P NetSupport School Untitled Paint