What is the capitalization of the market portfolio?
If a stock market comprises 2300 shares of stock A and 2300 shares of stock B with share prices of $25 and $15 respectively, what is the capitalization of the market portfolio?
Calculation of Market Portfolio Capitalization
To find the capitalization of the market portfolio:
Given that the market comprises 2300 shares of stock A and 2300 shares of stock B with share prices of $25 and $15 respectively.
The formula to calculate the capitalization of the market portfolio is:
Capitalization of market portfolio = Market capitalization of stock A + Market capitalization of stock B
Where:
Market capitalization of stock A = Number of shares of stock A × price per share of stock A
Market capitalization of stock B = Number of shares of stock B × price per share of stock B
Substitute the given values in the formula:
Market capitalization of stock A = 2300 shares × $25 = $57,500
Market capitalization of stock B = 2300 shares × $15 = $34,500
Therefore, the capitalization of the market portfolio is:
Capitalization of market portfolio = $57,500 + $34,500 = $92,000
Hence, the answer is A. $92,000