Suppose that the daily value of a financial time series follows the model X t = 0.01 + 0.2 X t − 2 + a t where is a Gaussian white noise series with mean zero and variance 0.02. What are the mean and variance of the return series ? Compute the lag-1 and lag-2 autocorrelations of . Assume that , and . Compute the 1- and 2-step-ahead forecasts of the return series at the forecast origin .

solution:

we have to construct

∠m nt ≅ ∠p qr

the steps to draw this construction are

step 1: use a compass to draw an arc from point q which intersects the side pq at point a and the side qr at point b.

step 2: draw a segment nt and use the same width of the compass to draw an arc from point n which intersects the segment nt at a point x.

step 3:

step 4: join points n and y using a straightedge.

step 3:

option (d).maintaining the same width of the compass as ab, draw an arc from point x such that it intersects the arc drawn from n in a point y.

to draw   congruent angles , 1. width of compasses while drawing two angles should be same i.e from point at which angle has to be drawn, 2.the distance between the two points where the compass intersects the two sides should be same while drawing any two congruent angles.

1 1/7 hope i

step-by-step explanation:

8/7 = (1 * 7 + 1) / 7 = 1 + 1/7 = 1 1/7