A new theory has been proposed. The expected percentage increase in alcoholism in each city is equal to the rate of change in the price of gold plus the product of two terms. The first is the covariance of the percentage change in alcoholism in the city with the percentage change in professors' salaries divided by the variance of the percentage change in professors' salaries. The second term is the percentage change in professors' salaries minus the percentage increase in gold. How would you test this proposition?
Answer to relevant QuestionsShow that if the market portfolio is not an efficient portfolio, then Cannot in general hold. Repeat Problem 1 if the three portfolios observed have the following characteristics. Find the equation of the plane that must describe equilibrium returns. If the market is semistrong-form efficient, must it be weak-form efficient? Assume that the forecast for the company in Problem 5 was such that at the end of the fifth year its growth was to decline linearly for four years to reach the steady state 6% growth rate. Assume that the payout ratio was ...Assume a bond with cash flows of $100 each year and a principal payment of $1,000 in five years and a current price of $960. What is A. Its current yield? B. Its yield to maturity?
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