$5$:$06$

$0$

$0$:$17$

$2$ of $5$

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Q$1.$ Portfolio Rebalancing

You have $100$ million dollars in your investment account and choose to keep your money allocated in the following proportion and rebalance each quarter:

i$.90\%$ in stocks via ETF SPY;

ii$.60\%$ in bonds via ETF TLT;

iii. amounts you have do not have are financed with cash borrowing.

Over the first three months of $2025,$ SPY went from $$585$ to $$565,$ and TLT went from $$87$ per share to $$91$ per share. Cash has an interest rate of $4\mathrm{.}2\%$ annually.

a$.$ What is your overall account $ balance before rebalancing? What proportion of that is in SPY$,$ TLT$,$ and CASH respectively? $(5$ points$)$

b$.$ How do you rebalance your account to keep the allocation at $90-60$ for SPY TLT respectively? What to buy and what to sell in dollar amount? What about trades in shares $(5$ points$)?$

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