Kaitie has $60,000 to invest. Of this amount, she reserves $15,000 for risk-free assets, leaving $45,000 for allocation to risky securities. There are only three firms in the economy, each of which issues common stock. The following are the price per share, the total number of shares outstanding, and the total value of each firm's securities.
|
Firm
|
Price
|
Quantity of Shares
|
Value of Firm
|
|
1
|
$150
|
70,000,000
|
$10,500,000,000
|
|
2
|
$80
|
93,750,000
|
$7,500,000,000
|
|
3
|
$25
|
1,000,000,000
Aggregate value of the firms
|
$25,000,000,000
43,000,000,000
|
According to the capital asset pricing model, in what proportions should Kaitie allocate the $45,000 across the risky securities in the economy if she is to construct the "market portfolio?"
How much money will Kaitie allocate to each security?