Question: For positive random variables X and Y, suppose the expected value of Y given X is E1Y0X2 5 uX. The unknown parameter u shows how

For positive random variables X and Y, suppose the expected value of Y given X is E1Y0X2 5 uX. The unknown parameter u shows how the expected value of Y changes with X.

(i) Define the random variable Z 5 Y/X. Show that E1Z2 5 u. [Hint: Use Property CE.2 along with the law of iterated expectations, Property CE.4. In particular, first show that E1Z0X2 5 u and then use CE.4.]

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