hw2 - 15% in England, and the England based f rm (E) has...

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ECONOMICS 331 Mathematical Economics Kevin Wainwright Homework Assignment #2 [1] In the interest of prudent diversi f 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 f rms that are based in Canada, the U.S. and England, it happens that each of these f rms conducts some of its operations through foreign subsidiaries. In particular, the Canadian based f rm (C) has 75% of its operations in Canada but 25% in the U.S., the U.S. based f 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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