The following are data on Country A's

(i) Gross Domestic Savings as a % of GDP and

(ii) Annual Growth Rate of GDP (in %).

Gross domestic savings (% of GDP) GDP grown (annual %)

2001 - 31 2001 - 4

2002 - 28 2002 - 4

2003 - 33 2003 - 5

2004 - 29 2004 - 5

2005 - 29 2005 - 6

(a) Calculate v, the estimated capital:output ratio for 2001 using the savings rate, s, and growth rate, g, using data for 2001. Assume that d, (the rate of depreciation of existing capital) is 5% and constant over all the years.

(b) Using this estimated ratio and the savings data for each of the following years: 2002 to 2005, calculate the predicted growth rate of GDP for each year from 2002 to 2005. Keep assuming that d = 5%. How well do the predicted growth rates match the actual growth rates?

(c) Now calculate v = the estimated capital: output ratio for each of the years 2002 to 2004. Then using the estimated value of v for 2002, and savings data for 2003, calculate the predicted growth rate of GDP for 2003; then using the estimated value of v for 2003, and savings data for 2004 calculate the predicted growth rate for 2004 and so on.

Question 1 :1 point: Semistrong form efficiency implies: I a] All historical market information, including prices and volume. is included in the price. I b] All information, both public and private is already incorporated in the price. I c} Superior returns may be obtained by the analysis of past prices and volumes. d] All public information is already incorporated in the price. Question 211 point]- Which ofthe following is NOT an empirical challenge to market efficiency? I a] small stocks tend to outperform large stocks I b] value stocks tend to outperform growth stocks I c] investors appear to react slowly to earnings announcements di stocks sometimes return more than their expected return s, and at othertimes return less than their expected returns Question 3 [1 point]- Which ofthe following should not lead to an increase in market efciency? I a] Information is available faster I b] Infon'nation is available at a lower cost cjl There are more assets {for example, number of stocks) in the market for the same number of market participants I d] There are more participants in the markets for the same number ofassets Question 411 polnt] An exchange rate regime is one under which rates of exchange are determined in the market on the basis of predominantly private transactions is called: 1. (a) Explain what is meant by the transition probability matrix of a homogeneous Markov chain. [5 marks] (b) Explain what is meant by the stationary distribution of a Markov chain? [5 marks] (c) A Markov chain has transition probability matrix, A, with entries Ouj; and stationary distribution . Write down an expression for the entries of the reverse Markov chain. [5 marks (d) Consider the following transition probability matrix of a homogo- neous Markov chain, with three states i,j and k (the TPM is in that order). If the stationary vector of the chain is (1/9, 2/9, 2/3), determine whether the Markov chain is reversible. 1 /0.2 0.2 0.6 0.1 0.6 0.3 4 \\0.1 0.1 0.8 [5 marks] (e) Let X1, X2, Xa be a sequence of random variables resulting from the above Markov chain. If X1 = i and Xs = j what is the probability that X2 = k? [5 marks](similar to) Question Help (CAPM and expected returns) a. Given the following holding-period returns, . compute the average returns and the standard deviations for the Zemin Corporation and for the market b. If Zemin's beta is 1.32 and the risk-free rate is 7 percent, what would be an expected return for an investor owning Zemin? (Note: Because the preceding returns are based on monthly data, you will need to annualize the returns to make them comparable with the risk-free rate. For simplicity, you can convert from monthly to yearly returns by multiplying the average monthly returns by 12.) C. How does Zemin's historical average return compare with the return you believe you should expect based on the capital asset pricing model and the firm's systematic risk? a. Given the holding-period returns shown in the table. the average monthly return for the Zemin Corporation is 5% (Bound to two decimal places. ) i Data Table X Month Zemin Corp Market 7% GUAUNE Print Done Enter your answer in the answer box and then click Check Answer. Check Anniver Clear All 6 parts remaining W e DELLQUESTION 1 All risk that stockholders bear should be compensated with higher expectations for returns True False. Only firm risk compensates through higher expected returns )False, Only market risk compensates through higher expected returns False. Only interest rate risk compensates through higher expected returns QUESTION 2 For the majority of stocks, what percentage of their returns fall between 1 and 2 standard deviations away from their average return? About equal to 27% Greater than 279% Less than 2796 About 13.5%E. One month Question 5: An increase in real wealth in India will . Select all that apply. Choose one or more: A. increase Indian aggregate demand B. decrease Indian aggregate demand C. increase U.S. aggregate demand D. decrease U.S. aggregate demand Question 6: Choose the right answer: Net exports will increase/decrease/stay the same when the value of the dollar result, the aggregate demand curve will shift left/increase. ECON 1204-001 Principles of Macro Spring 2019 Question 7