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A stock's adjusted close prices at month 1 and 2 are P-10, and P-11. As we discussed in class, there are two equally valid ways
A stock's adjusted close prices at month 1 and 2 are P-10, and P-11. As we discussed in class, there are two equally valid ways to compute stock returns, (Method 1) Month-over-month percentage returns=111010=1096 (Method 2) log returns In(11/10-9.53%. . Answer the following questions a. Write P as a function of r, and P under two methods b. Explain why r2 resembles simple interest rate, and r" resembles continuously compounded interest rate. Explain why the values of ri and Explain why are closer to each other c. d
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