Q17. Suppose M is a stochastic matrix representing the probabilities of transitions each month. Compute the matrix of compounded transition probabilities for 3 months into the future, or M³. (Note, prior to multiplying matrices, the given components of M must be used to fill in the missing components [**] such that M is a stochastic matrix.)

The following data consists of a matrix of transition probabilities (P) of three competing companies, the initial market share state ℼ(1), and the equilibrium probability states. Assume that each state represents a firm (Company 1, Company 2, and Company 3, respectively) and the transition probabilities represent changes from one month to the next. The market share of Company 2 after two periods is a. 0.283 b. 0.26 c. 0.261 d. 0.47

what is the solution?

Consider a set of three assets, one risk-free and two risky. The covariance matrix [0.36 0.07] for the risky assets is given by = 0.07 The risk-free rate is 0.03 0.07 0.29 and risk aversion is A = 4. Calculate the optimal portfolio for this individual.