Answer:
Let investment in C = $x
Hence, investment in risk free asset = 500,000 - (139,000+141,000+x) = $220 - $x
1 = (139,000/500,000*0.84)+(141,000/500,000*1.29)+(x/500,000*1.44)+(220,000-x)/500,000*0 [Beta of market=1 ;Beta of risk-free assets=0]
1 = 0.23352+0.36378 + (x/500,000*1.44)
1 = 0.5973 + (x/500,000*1.44)
x = (1 - 0.5973)*500,000/1.44
x = 0.4027*347222.22
x = 139826.387994
x = $139,826.39
investment in C = $139,826.39
Hence, investment in risk free asset = $(220,000-x) = $220,000 - $139,826.39
Investment in risk free asset = $80,173.61
