{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}


Problem_Set_3 - Economic Growth and Development Professor...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Economic Growth and Development Professor Olivier de La Grandville Fall 2008 Problem Set 3 To be returned Wednesday, October 22 nd , 2008 * 1. Suppose that a given economy is governed by a CES production function with δ = 0 . 25; the labor augmenting rate of technical progress is g = 1% per year; the growth rate of population is 1% per year. Supposing that society maximizes V = R 0 C t e - it dt under the usual constraint, determine s * and V * for values of σ between 0.7 and 1.3 (steps of 0.05), and values of i between 0.04 and 0.09, (steps of 0.01). For the same values of σ and i , determine the ratio of the elasticity of V * with respect to σ , divided by the elasticity of V * with respect to g . 2. Suppose that the annual expected return of stocks A and B are E ( R A ) = 8% and E ( R B ) = 7%; their standard deviations are
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Ask a homework question - tutors are online