1.We fit the ARCH(1) model to daily returns (in percentages) of QQQ from 2006 to 2015 and obtain =0.1, =1.31 and 1=0.31.If today's return is 10 percent, what is the conditional variance for tomorrow's return? Select one:

a.31.69 b.4.38 c.32.31 d.30.38

2.Consider the ARCH(1) model in question 1. If today 's return is 10 percent, what is the probability that the asset's price would drop by 10 percent or more tomorrow? Express your answer in terms of the standard normal cdf function . Select one:

a.(-1.645) b.(-1.79) c.(1.645) d.(1.79)

3. Consider the ARCH(1) model in question 1. If today's return is 1 percent, what is the conditional volatility (standard deviation) for tomorrow's return? Select one:

a.1.56 b.1.01 c.1.25 d.1.62

4. Consider the ARCH(1) model in question 1. If today's return is 1 percent, what is the probability that the asset's price would drop by 10 percent or more tomorrow? Express your answer in terms of the standard normal cdf function . Select one:

a.(-1.25) b.(-8.1) c.(-10)

5. Compare the results from question 2 and 4. Which scenario would predict a higher probability for a larger than 10 percent loss tomorrow? Select one:

a.If today's return is 1 percent b.If today's return is 10 percent