Question: Consider the process: Yt = 2 + 0.5yt1 + & with & ~ N (0,0%) = 1+0.4 +0.40% 1 -1 Suppose today is time

Consider the process: Yt = 2 + 0.5yt1 + & with &

Consider the process: Yt = 2 + 0.5yt1 + & with & ~ N (0,0%) = 1+0.4 +0.40% 1 -1 Suppose today is time t, and yt = = = 3, 1, and = 10. Conditional on information up to today, find the expected value of Yt+2, i.e., Vart [yt+2] 5 5.4 5.32 6.67

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