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a. Based on the common knowledge at the beginning of period I, determine whether or not it is the case that SID = S: ?
a. Based on the common knowledge at the beginning of period I, determine whether or not it is the case that SID = S: ? If it is, clearly and carefully explain why; if it is not, clearly and carefully explain why not. (Note: It is left to you to determine the most relevant steps of logic and/or mathematics and/or graphical analysis that support(s) the conclusion. A conclusion, even if correct, will be awarded ZERO points if there is no or very little support behind it.) b. At the beginning of period t+5, a completely unexpected \"government coup\" occurs abroad, and the new government announces that the dividend restriction on international stock will last forever. More precisely, the restricted dividend payment schedule announced in the beginning of period 1+5 is =01 ...=0. z+43 = = D' ____= D' 1+10 = I+42 =01 r+9 :01 {+8 :01 {+7 =D' 2+6 Dis Supposing that this announcement by the new government is believed by everybody, provide ONE equation for the period t+5 nominal price of international stock and ONE equation for the period t+5 nominal price of domestic stock, which should be written as SI =... t+5 SD: t+5 in which the pair of right-hand sides are for you to determine. (Note: As in part a, it is left to you to determine the most relevant steps of logic and/or mathematics and/or graphical analysis that support(s) the conclusion. The conclusion, even if correct, will be awarded ZERO points if there is no or very little support behind it.)
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