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# hw2 - 15 in England and the England based f rm(E has 50 of...

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ECONOMICS 331 Mathematical Economics Kevin Wainwright Homework Assignment #2 [1] In the interest of prudent diversi fi cation, an investor wishes to have his \$100 of wealth invested as \$50 in the Canadian economy, \$30 in the U.S. economy, and \$20 in the English economy. Although he can purchase the shares of fi rms that are based in Canada, the U.S. and England, it happens that each of these fi rms conducts some of its operations through foreign subsidiaries. In particular, the Canadian based fi rm (C) has 75% of its operations in Canada but 25% in the U.S., the U.S. based fi rm (U) has 85% of its operations in the U.S. but
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Unformatted text preview: 15% in England, and the England based f rm (E) has 50% of its operations in England but 30% in Canada and 20% in the U.S. • The problem for the investor is to determine the proper amounts to invest in each of these three f rms to achieve his desired investment in the three economies. Write down a matrix equation that represents the problem he has to solve. Let the amounts invested in the three f rms be represented by the column vector: ( C,U,E, ) T • Use matrix inversion to solve for the amount that he should invest in each f rm simultaneously. 1...
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