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Consider the following model yt = 0
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Consider the following model yt = 0.3 + 0.4&t1 + Et, where &t is a white noise process. The correlation between yt and yt-1 for this process is: Select one: O A. 0.4 O B. None of these. O C. 1.3333 O D. 0.12 E. 0.3448
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The best way to compare two projects with unequal lives is the A) payback period.
B) present worth comparison method.
C) study period method.
D) annual worth comparison method.
E) incremental present worth comparison method.
Expert Solution
- yt = 0.3 + 0.4et-1 + et
=> The value of φ. is 0.4.
It is coefficient of et-1.
The correlation between yt and yt-1 of this process is φ.
=> Corr(yt , yt-1) = 0.4
Answer: Option (A)
Note: Corr(yt - yt-k) = φk
2
The best way to compare two projects with unequal lives is the
D) Annual worth comparison method
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