4. In the interest of prudent diversification, an investor wishes to have his $100 of wealth...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
4. In the interest of prudent diversification, 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 firms that are based in Canada, the U.S and England, it happens that each of these firms conducts some of its operations through foreign subsidiaries. In particular, the Canadian based firm (C) has 75% of its operations in Canada but 25% in the U.S., the U.S. based firm (U) has 85% of its operations in the U.S. but 15% in England, and the England based firm (E) has 50% of its operations in England but 30% in Canada and 20% in the U.S.. The three functions are: .75C +.3E =50, .25C + .85U +.2E = 30, .15U + .5E=20 The problem for the investor is to determine the proper amounts to invest in each of these three firms to achieve his desired investment in the three economies. Use matrix inversion to solve for the amount that he should invest in each firm. 5. Use Cramer's Rule to solve the problem that is presented in question # 4. 4. In the interest of prudent diversification, 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 firms that are based in Canada, the U.S and England, it happens that each of these firms conducts some of its operations through foreign subsidiaries. In particular, the Canadian based firm (C) has 75% of its operations in Canada but 25% in the U.S., the U.S. based firm (U) has 85% of its operations in the U.S. but 15% in England, and the England based firm (E) has 50% of its operations in England but 30% in Canada and 20% in the U.S.. The three functions are: .75C +.3E =50, .25C + .85U +.2E = 30, .15U + .5E=20 The problem for the investor is to determine the proper amounts to invest in each of these three firms to achieve his desired investment in the three economies. Use matrix inversion to solve for the amount that he should invest in each firm. 5. Use Cramer's Rule to solve the problem that is presented in question # 4.
Expert Answer:
Related Book For
Discrete Mathematics and Its Applications
ISBN: 978-0073383095
7th edition
Authors: Kenneth H. Rosen
Posted Date:
Students also viewed these accounting questions
-
In each of these statements, tell whether descriptive or inferential statistics have been used. a. By 2040 at least 3.5 billion people will run short of water (World Future Society). b. Nine out of...
-
Determine whether the integers in each of these sets are pairwise relatively prime. a) 11, 15, 19 b) 14, 15, 21 c) 12, 17, 31, 37 d) 7, 8, 9, 11
-
Determine whether the integers in each of these sets are mutually relatively prime. a) 8, 10, 12 b) 12, 15, 25 c) 15, 21, 28 d) 21, 24, 28, 32
-
The Acme Insurance Company purchased a five-year bond whose interest rate floats with LIBOR. Specifically, the interest rate in a given year is equal to LIBOR plus 200 basis points. At the same time...
-
Suppose an economic boom causes incomes to increase. Explain what will happen to the demand and supply of phones, and predict the direction of the change in the equilibrium price and quantity.
-
The Taurin Partnership (calendar-year-end) has the following assets as of December 31 of the current year: .......................................Tax Basis........................FMV...
-
Find out the average number of times children in three different classes ask a question each day of the week. What measure of central tendency did you use and why?
-
Hasan Fareed, a 24-year-old college graduate, never took a personal finance class. He pays his bills on time, has managed to save a little in an investment account, and with the help of an...
-
E. Chrissy's Vases is a boutique selling artisan vases. The boutique purchases several styles of vases from one source. The cost of the vases to the boutique is $10 each. All other costs for...
-
Reds Furniture Manufacturing produces a line of tables and chairs from specialty hardwoods. It makes three different styles of chairs, and each chair takes about the same amount of direct labor time...
-
One of the constituents of the pancreatic juice which is poured into the duodenum in human beings is (a) Trypsinogen (b) Chymotrypsinogen (c) Trypsin (d) Both A and B
-
Can you explain recent brokerage reports and analyst recommendations for Amazon.com?
-
Suppose that unexpectedly the Bank of Norway increases the interest rate by 50bp. The FED keeps the target interest rate stable. What will happen to the spot and forward exchange rates? Discuss.
-
I will invest $500,000 in a property and anticipate the following cash flows (assume they occur at the end of each period to make things simple): Cash Flow year 1: $90,000 Cash Flow year 2: $95,000...
-
Builtrite has a capital structure of 60% common stock and 40% debt. Bonds being sold will have a $1000 par, 7% coupon rate, a 15 year maturity with a selling price of $1040 and flotation costs of $15...
-
DynCorp's FCFF is expected to be $600 million. The firm's interest expense is $80 million. The net debt of the firm decreases by $40 million. The tax rate is 35%. What are the FCFE, the market value...
-
Short-run costs that increase and decrease as an output increases or decreases are called Group of answer choices a. Secondary costs. b. Derived costs. c. Variable costs. d. Partial costs. e....
-
How will relating product contribution margin s to the amount of the constrained resource they consume help a company maximize its profits?
-
Let S be the subset of the set of ordered pairs of integers defined recursively by Basis step: (0, 0) S. Recursive step: If (a, b) S, then (a, b + 1) S, (a + 1, b + 1) S, and (a + 2, b + 1) S....
-
Let R be a relation on a set A. Explain how to use the directed graph representing R to obtain the directed graph representing the inverse relation R1.
-
If E and F are independent events, prove or disprove that E and F are necessarily independent events. In Exercises 18, 20, and 21 assume that the year has 366 days and all birthdays are equally...
-
The duties of a nozzle and a diffuser are (a) Opposite to each other (b) Identical to each other (c) Not comparable at all (d) None of these.
-
Nozzles and diffusers are widely used in (a) Heat exchangers (b) Refrigeration systems (c) Rockets and other space vehicles (d) None of these.
-
Pick out the correct relation between the \(\mathrm{COP}\) of a refrigerator \(\left(\mathrm{COP}_{\mathrm{R}} ight)\) and that of the heat pump \(\left(\mathrm{COP}_{\mathrm{HP}} ight)\) (a)...
Study smarter with the SolutionInn App