Mathematics for Business and Economics - Midterm 4

January 13, 2020 Enrolment Year Points

Non-graphic calculator is allowed. Time: 30 minutes. Good luck! • full-time
• part-time 1
Name and surname Registration number 2


Problem 1 (5 points)
1 0 0 0
 
−1 1 0 0
Find the inverse of the matrix A =
1 −1 1 0
.
2 1 −1 2

Solution

1 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0
   
 −1 1 0 0 0 1 0 0 0 1 0 0 1 1 0 0
A 4 = 

∼ ∼
1 −1 1 0 0 0 1 0 0 −1 1 0 −1 0 1 0
2 1 −1 2 0 0 0 1 0 1 −1 2 −2 0 0 1

1 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0
   
0 1 0 0 1 1 0 0 0 1 0 0 1 1 0 0
∼ ∼ ∼
0 0 1 0 0 1 1 0 0 0 1 0 0 1 1 0
0 0 −1 2 −3 −1 0 1 0 0 0 2 −3 0 1 1
 
1 0 0 0 1 0 0 0
0 1 0 0 1 1 0 0
 A−1
1 1 0 = 4
 
∼
0 0 1 0 0


0 0 0 1 − 32 0 12 12

 
1 0 0 0
 1 1 0 0
A−1 =
 0 1 1 0


− 32 0 12 21
Problem 2 (5 points)
Financial instruments A, B, and C will pay their holders the following returns:
A: e5 one year from now and e105 two years from now;
B: e5 one year from now, e5 two years from now, and e200 three years from now;
C: e5 one year from now, e5 two years from now, and e100 three years from now.
An investor wants e50 one year from now, e250 two years from now, and e1,100
three years from now.
a) (4) Find the portfolio (a combination of instruments) the investor should buy now.
b) (1) Financial instrument A costs e100, instrument B e170, and instrument C e90.
How much does the investor pay for his portfolio?

Solution

a) Data:

Payoff A B C Claim
1 year 5 5 5 50
2 years 105 5 5 250
3 years 0 200 100 1,100
Price 100 170 90
Number  y z

System of equations:

5 + 5y + 5z = 50
105 + 5y + 5z = 250
200y + 100z = 1,100

After simplification:

 + y + z = 10
21 + y + z = 50
2y + z = 11

Elimination method:
   
1 1 1 10 1 0 0 2
21 1 1 50 ∼ · · · ∼ 0 1 0 3
0 2 1 11 0 0 1 5

Unique solution:  = 2, y = 3, z = 5
The investor should buy 2 instruments A, 3 instruments B, and 5 instruments C.
b) The investor pays e1,160.
Mathematics for Business and Economics - Midterm 4
January 13, 2020 Enrolment Year Points
Non-graphic calculator is allowed. Time: 30 minutes. Good luck! • full-time
• part-time 1
Name and surname Registration number 2


Problem 1 (5 points)
1 0 0 0
 
 1 1 0 0
Find the inverse of the matrix B =
−1 1 1 0
.
2 −1 1 2

Solution

1 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0
   
  1 1 0 0 0 1 0 0 0 1 0 0 −1 1 0 0
B 4 = 

∼ ∼
−1 1 1 0 0 0 1 0 0 1 1 0 1 0 1 0
2 −1 1 2 0 0 0 1 0 −1 1 2 −2 0 0 1

1 0 0 0 1 0 0 0 1 0 0 0 1 0 0 0
   
0 1 0 0 −1 1 0 0 0 1 0 0 −1 1 0 0
∼ ∼ ∼
0 0 1 0 2 −1 1 0 0 0 1 0 2 −1 1 0
0 0 1 2 −3 1 0 1 0 0 0 2 −5 2 −1 1
 
1 0 0 0 1 0 0 0
0 1 0 0 −1 1 0 0
 B−1
0 = 4
 
∼
0 0 1 0 2 −1 1


0 0 0 1 − 25 1 − 21 1
2

 
1 0 0 0
 −1 1 0 0
B−1 =
 2 −1 1 0


− 25 1 − 12 1
2
Problem 2 (5 points)
Financial instruments A, B, and C will pay their holders the following returns:
A: e5 one year from now and e105 two years from now;
B: e5 one year from now, e5 two years from now, and e200 three years from now;
C: e5 one year from now, e5 two years from now, and e100 three years from now.
An investor wants e50 one year from now, e550 two years from now, and e800
three years from now.
a) (4) Find the portfolio (a combination of instruments) the investor should buy now.
b) (1) Financial instrument A costs e90, instrument B e150, and instrument C e80.
How much does the investor pay for her portfolio?

Solution

a) Data:

Payoff A B C Claim
1 year 5 5 5 50
2 years 105 5 5 550
3 years 0 200 100 800
Price 90 150 80
Number  y z

System of equations:

5 + 5y + 5z = 50
105 + 5y + 5z = 550
200y + 100z = 800

After simplification:

 + y + z = 10
21 + y + z = 110
2y + z = 8

Elimination method:
   
1 1 1 10 1 0 0 5
21 1 1 110 ∼ · · · ∼ 0 1 0 3
0 2 1 8 0 0 1 2

Unique solution:  = 5, y = 3, z = 2
The investor should buy 5 instruments A, 3 instruments B, and 2 instruments C.
b) The investor pays e1,060.