hw5 - 4. Refer to example 2, page 4, formulas 6. Solve the...

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Homework 5 (Due October 11) 1. (a) Explain why the real rental price must equal the interest rate (that is, R t /P t δ = i t 1 ). (b) In reality, we observe assets with di f erent returns. Does your explanation in part (a) con f ictw ithsuchobservat ion? 2. Verify the claim of zero pro F t (see page 7, formulas 5) either through a numerical example or through a general arguement. (This actually has been
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Unformatted text preview: 4. Refer to example 2, page 4, formulas 6. Solve the optimal ( c 1 , c 2 ) . (The formula for c 1 is already given in the last line of that page.) 5. Refer to example 3, page 5, formulas 6. Solve the optimal ( c 1 , c 2 ) . (The formula for c 1 is already given in the last line of that page.) 6. Refer to case 1, page 6, formulas 6. Answers three questions in the end of that page. 1...
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This homework help was uploaded on 12/13/2007 for the course ECON 3140 taught by Professor Mbiekop during the Fall '07 term at Cornell University (Engineering School).

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