Solution

ID: past-exam-of-the-probability-statistics-and-options-i-course-of-the-university-of-oxford/2009/f/1/b/solution

The constraint intersection is nonempty, closed and bounded, hence compact, so extrema exist. The two constraint gradients are and . If the first were times the second, the plane condition would give , so and all coordinates would vanish, contradicting the ellipsoid equation. Their rank is therefore two at every feasible point, justifying the Lagrange multiplier equations.
These equations are
Eliminating gives and . The first equation makes ; subtracting twice the first from the second forces . Hence , and the ellipsoid gives . Thus
All candidates were found, and compactness ensures they include the extrema.

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