10. Suppose you can invest in only the market index fund and 12-month treasury bill because of some regulation. E[r]=10%, SD[r]=20%, and rf=2%. You are a portfolio manager at Fidelity. Suppose, based on your price of risk and the portfolio theory, you invest $0.5m in the market index fund and $0.5m in the 12-month treasury bill today. One year later, the annual net return of the market index fund turns out 10%. If E[r], SD[r], rf, and your price of risk remain the same, how should you rebalance your portfolio? That is, do you have to sell or buy the market index fund after you observe its high return of 10%, based on the portfolio theory? Express your answer in a following manner. For example, if your answer is Sell $0.24m worth of the market portfolio, then enter -0.24. If your answer is Buy $0.92m worth of the market portfolio, then enter 0.92.

12.

9. Suppose you can invest in only the market index fund and 12-month treasury bill because of some regulation. E[r]=10%, SD[r]=20%, and rf=2%. You are a portfolio manager at Fidelity. Suppose, based on your price of risk and the portfolio theory, you invest $0.5m in the market index fund and $0.5m in the 12-month treasury bill today. One year later, the annual net return of the market index fund turns out 10%. If E[r], SD[r], rf, and your price of risk remain the same, how should you rebalance your portfolio? That is, do you have to sell or buy the market index fund after you observe its high return of 10%, based on the portfolio theory? Express your answer in a following manner. For example, if your answer is Sell $0.24m worth of the market portfolio, then enter -0.24. If your answer is Buy $0.92m worth of the market portfolio, then enter 0.92.