 Solution

The time-zero budget constraint isso ${\theta }^0=w_0-{\theta }^T{S}_0$. The terminal wealth is thereforePutThenand the target mean is the linear constraint ${\theta }^{T}b=c$.

Since the invertible covariance matrix $V$ is positive definite, the Lagrange multiplier equation for minimizing ${\theta }^{T}V\theta$ isThusThe constraint determinesThis is the one-period Gaussian minimum-variance portfolio; the riskless holding is then ${\theta }^0=w_0-{\theta }^T{S}_0$.