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5.
![In the asset price model, verify that
E[S(t)] = Soeht
E[S(t)²] = S²e(²µ+o²)t
Var[S(t)] = Se²ut (eo²t - 1)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Febc8ac19-66c7-4532-a205-006069a7a78c%2F48b54fd4-a6bf-4a07-95f6-55e5159d6bb5%2Fjkdymbr_processed.png&w=3840&q=75)
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- Suppose the demand functions for two products are q1 = f(p1, p2) and q2 = g(p1, p2) wherep1, p2, q1, and q2 are the prices (in dollars) and quantities for products 1 and 2. Consider thefour partial derivatives∂q1/∂p1,∂q1/∂p2,∂q2/∂p1and ∂q2/∂p2,State the sign of each of these partial derivatives if:(a) the products are complementary goods(b) the products are substitute goods.Applying the DDM model utilizing the following inputs: PO, d1, d2, r, g. When rearranging the price expression so that we can solve for g, g= r - d2/((PO*(1+r)-d1)) True False4) Assume the index model is valid, what inputs will be required to determine covariance between two assets? A) βk B) βL C) σM D) all of the options E) None of the options are correct. Choose the correct answer with justification
- What is the formula to calculate CAPM Req. ReturnPLEASE USE NPV(NET PRESENT VALUE) THANK YOUUA forward contract has an underlying asset which, in Cox-RossRubenstein notation, has S=22,u=1.2 and d=0.9. This forward contract matures in one time step and the return over this time step is R=1.02. Assuming the forward price is calculated rationally, what is the value of the forward at node (1,1)? (Give your answer as a positive number.)
- a) Let VK(t, T) be the value of a forward contract on an asset with delivery price K, VK(t, T) = (F(t, T) − K)e −r(T −t) . a) Verify that VK(T, T) equals the payout of a forward contract with delivery price K. For an asset that pays no income, substitute the expression for its forward price into the above equation and give an intuitive explanation for the resulting expression. b) Suppose at time t0 you go short a forward contract on an asset that pays no income with maturity T (and with delivery price equal to the forward price). At time t, t0 < t < T, suppose both the price of the asset and interest rates are unchanged. How much money have you made or lost? This is sometimes called the carry of the trade.What is the difference between YTD and YoY return? Provide an exampleThe expected value, standard deviation of returns, and coefficient o below.) \table[[Asset A],[Possible Outcomes,Probability,Returns (%)
- find The internal rate of return (IRR) for this case in exceland equation.Think about whether a risk-free asset should earn a risk-premium beyond the risk-free rate. Thinking about that should give you an idea of the beta for a risk-free asset. Or, look again at the CAPM equation: E(Ri)=Rf+βi[E(RM)−Rf] Given this equation, what beta sets the E(R) of the risk free asset equal to the risk-free rate? A) zero B) 0.5 C) 1.0 D) its randomDefine each of the following terms: d. Modified internal rate of return (MIRR) method