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Long Question (20 points) A stock's adjusted close prices at month 1 and 2 are P 10, and P-11. As we discussed in class, there
Long Question (20 points) 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 i) Month-over-month percentage returns ri=11-10-1096 (Method 2) log returns = ln(11/10) = 9.53%. 10 . Answer the following questions Write P, as a function of r, and P, under two methods Explain whyresembles simple interest rate, and . resembles continuously compounded interest rate. Explain why the values of r2 and r2 are closer to each other. Explain why a. b. c. d
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