Question: A B Risk free Expected Return 16% 23% 2% Standard Deviation o 11% 28% 0% Covariance, Cov(rare) -0.00462 Correlation Coefficient, PAB -15% WA [E(TA) --

A B Risk free Expected Return 16% 23% 2% Standard Deviation o 11% 28% 0% Covariance, Cov(rare) -0.00462 Correlation Coefficient, PAB -15% WA [E(TA) -- 10% [E(TB)--, JOAB PAB [E(ra)--> 10+[E(TB)--, 10%-[E(TA)+E(TB)-2r; JOAB PAB What is the optimal portfolio weight for A? 60.10% O 38.45% 49.59% O 56.63%

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=+productivity depends on growth in total factor productivity and growth in the capitallabor ratio. In particular, show that D1Y/L2 Y/L = DA A + a D1K/L2 K/L .

=+ Hint: You may fi nd the following mathematical trick helpful. If z = wx, then the growth rate of z is approximately the growth rate of w plus the growth rate of x. That is, z/z w/w + x/x.

=+ 3. Suppose an economy described by the Solow model is in a steady state with population growth n of 1.8 percent per year and technological progress g of 1.8 percent per year. Total output and