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$48000 is the capitalization of the market portfolio.
Option B. $48000.
Capitalization of market portfolio=(Number of shares of each type of stock*Price per share)
=(2400*!5)+(2400*5)
=$48000.
A market portfolio is a theoretical bundle of investments containing all types of assets available in the investment universe, with each asset weighted proportionally to its overall market presence. The expected return of the market portfolio is the same as the expected return of the market as a whole.
The market portfolio is an efficient portfolio. Its allocation provides a single optimal mix of risk assets. 2. The expected return of each asset follows a simple linear relationship with the expected return of the market portfolio.
At CAPM, the market portfolio has the highest possible Sharpe ratio, making it the best investment.
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Question: A stock market comprises 2400 shares of stock A and 2400 shares of stock B. The share prices for stocks A and B are $15 and $5, respectively. What is the capitalization of the market portfolio?
A) $43,200
B) $48,000
C) $55,200
D) $52,800
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