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1. (10 points) Consider an infinitely lived asset that pays risk-free dividend dt-1 at every date t. Suppose that one-period risk-free rate of return is
1. (10 points) Consider an infinitely lived asset that pays risk-free dividend dt-1 at every date t. Suppose that one-period risk-free rate of return is r -0.1 at every date t. Show that asset price pt- 10 for every t satisfies the NPV relation with no bubble. Give an example of price sequence {pt) such that there is a strictly positive bubble
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