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- 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 FalseSuppose 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.4) 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
- Consider the formula: A = P(1 + r)t. What can we say about the variable A? it is a future value it is a present valueInternal Rate of Return is the discount rate that sets NPV to 0. True or false?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.
- 1. What are the values of the unit claims (C1 and C2)? 2. What is the risk free rate implied by these assets?Topic: Annuities due Formulas in annuities due *future value, F=C [(1+i)^n -1/i] (1+i) * present value, P=C [1-(1+i)^-n/i] (1+i) Please show how the final answer arrived.The expected value, standard deviation of returns, and coefficient o below.) \table[[Asset A],[Possible Outcomes,Probability,Returns (%)