Homework 1

asset.names <- c("MSFT", "NORD", "SBUX")
mu.vec = c(0.0427, 0.0015, 0.0285)
names(mu.vec) = asset.names
sigma.mat = matrix(c(0.0100, 0.0018, 0.0011, 
                     0.0018, 0.0109, 0.0026, 
                     0.0011, 0.0026, 0.0199), 
                   nrow = 3, ncol = 3)
dimnames(sigma.mat) = list(asset.names, asset.names)
mu.vec

##   MSFT   NORD   SBUX 
## 0.0427 0.0015 0.0285

sigma.mat

##        MSFT   NORD   SBUX
## MSFT 0.0100 0.0018 0.0011
## NORD 0.0018 0.0109 0.0026
## SBUX 0.0011 0.0026 0.0199

x.vec = rep(1,3)/3
names(x.vec) = asset.names
mu.p.x = crossprod(x.vec, mu.vec)
sig2.p.x = t(x.vec)%*%sigma.mat%*%x.vec
sig.p.x = sqrt(sig2.p.x)
mu.p.x

##            [,1]
## [1,] 0.02423333

sig.p.x

##            [,1]
## [1,] 0.07586538

top.mat = cbind(2*sigma.mat, rep(1,3))
bot.vec = c(rep(1,3), 0)
Am.mat = rbind(top.mat, bot.vec)
b.vec = c(rep(0,3), 1)
z.m.mat = solve(Am.mat)%*%b.vec
m.vec = z.m.mat[1:3, 1]
m.vec

##      MSFT      NORD      SBUX 
## 0.4411093 0.3656263 0.1932644

mu.gmin = as.numeric(crossprod(m.vec, mu.vec))
mu.gmin

## [1] 0.02489184

sig2.gmin = as.numeric(t(m.vec)%*%sigma.mat%*%m.vec)
sig.gmin = sqrt(sig2.gmin)
sig.gmin

## [1] 0.07267607

one.vec = rep(1, 3)
sigma.inv.mat = solve(sigma.mat)
top.mat = sigma.inv.mat%*%one.vec
top.mat

##          [,1]
## MSFT 83.51478
## NORD 69.22366
## SBUX 36.59056

bot.val = as.numeric((t(one.vec)%*%sigma.inv.mat%*%one.vec))
bot.val

## [1] 189.329

m.mat = top.mat/bot.val
m.mat[,1]

##      MSFT      NORD      SBUX 
## 0.4411093 0.3656263 0.1932644