Question 1 A dividend process follows the deterministic process: t+1 = A. It (1) where It is an nx 1 vector and A is an n x n matrix, and yt = G24 = (2) where yt is the dividend(a scalar), and G is an 1 x n vector. Assume future profits are discounted by B E (0,1), and that I - BA is invertible. (a) What is the stock price of the firm pt, in terms of A and G if there was no bubble? (b) What is the stock price of the firm today, Pt, in terms of the price tomorrow, Pt+1, and the state today, It? (C) A friend guesses that the stock price should be Pt = H. It tell (3) for some vector H ER" and scalars c, d. Get as far as you can in finding formulas for H, c, 1. (Hint: use the guess and verify to find the undetermined constants, with the recursive definition of the price from (b)). (d) Is H unique? How about cand ? Question 1 A dividend process follows the deterministic process: t+1 = A. It (1) where It is an nx 1 vector and A is an n x n matrix, and yt = G24 = (2) where yt is the dividend(a scalar), and G is an 1 x n vector. Assume future profits are discounted by B E (0,1), and that I - BA is invertible. (a) What is the stock price of the firm pt, in terms of A and G if there was no bubble? (b) What is the stock price of the firm today, Pt, in terms of the price tomorrow, Pt+1, and the state today, It? (C) A friend guesses that the stock price should be Pt = H. It tell (3) for some vector H ER" and scalars c, d. Get as far as you can in finding formulas for H, c, 1. (Hint: use the guess and verify to find the undetermined constants, with the recursive definition of the price from (b)). (d) Is H unique? How about cand