Derivatives Markets

3. Before the markets opened on June 11, 2020, Rx, a large drug company, has just announced a vaccine for COVID 19. Rx's stock price increased from $10 to $310 in one day. In accordance with CAPM, your wealth is invested in the market portfolio and the risk free asset. The risk free asset is yielding 0.1%. Rx made up 0.4% of the market portfolio before the news announcement On the day of the announcement your portfolio increased by 12%. The market portfolio excluding the price increase of Rx grew by 8%. How is your wealth invested? A) 30% in the market, 70% risk free C) 50% in the market, 50% risk free E) 70% in the market, 30% risk free B) 40% in the market, 60% risk free D) 60% in the market, 40% risk free