User Account

All Pages

Inflation expectations, Business Economics

Assignment Help:
An individual holds B_0 dollars in a saving accountant at t=0 and earns continuously compounded interest at a nominal rate r. Therefore, the nominal value of his savings at time t is given B_t=e^rt. To find out the real value of his savings at each moment in time, we must divide by the price level. Assume the price level follows a geometric Brownian motion:
dP=pPdt+sPdz
where p is the expected rate of inflation and s is its volatility parameter
Let B_t/P_t be the real value of savings. Derive the law of motion for b using Ito’s Lemma. (Hint: you should obtain a law db=f (b)dt+ g(b)dz, where f and g are functions og just b for you to derive)
What is the individual’s expected real rate of return on his savings?
Calculate the expected real value of the individual’s savings at time t from the point of view of t=0, i.e E_¦(0@)[b_t]

Related Discussions:- Inflation expectations

Explain the term balance of payments, QUESTION (a) Explain the term Bal...

QUESTION (a) Explain the term Balance of Payments (BOP) and how a government would intervene to correct a BOP deficit. (b) Explain the protectionist measures that a governme

Agriculture economics, A1. Given the following production function Level of...

A1. Given the following production function Level of fertilizer Level of maize 0 0 1 44.9 2 83.6 3 110.1 4 127.3 5 136.9 6 139.9 7 137.1 8 129.2 a) Calculate the APP, MPP and elas

What are the import substitution policies, What are the import substitution...

What are the import substitution policies? Import substitution policies are as follows: Need trade restrictions for example, tariffs and quotas to defend infant industr

Curse embodied, a)      What is the curse embodied in the standard producti...

a)      What is the curse embodied in the standard production function? How does technological advance permit  an economy to avoid this curse? b )    In what significant way doe

Research Methods, A .Develop a researchable topic and prepare a research pr...

A .Develop a researchable topic and prepare a research proposal using the layout outlined below. CAVENDISH UNIVERSITY DISSERTATION PROPOSAL LAYOUT TITLE PAGE CHAPTER ONE: INTRODU

Plot the budget line and evaluate slope, This problem illustrates a consume...

This problem illustrates a consumer's decision to be homeless in the presence of a minimum housing-consumption constraint, imposed through misguided government regulation. Let c

Managerial Economics, Demand

Demand

Explain the different types of unemployment that exist, QUESTION (a) "T...

QUESTION (a) "There is always an inverse relationship between price and quantity demanded of a good." Discuss. (b) Explain with appropriate diagram(s) the different factors

How can value management be utilized, How can value management be utilized ...

How can value management be utilized to compare various possible design solutions? When the bottom-level objectives for a project have been acknowledged through these technique

Inflation, assignment .

assignment .

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd