Question #fc123

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Answer 1 · 2015-11-03T10:33:28

Choice 1#" "pi= y#
Choice 2#" " pi= yB(1+r)#

Given:

#1 +pi/(y(1+r)) times ( (1+r)(1 + pi)-1) =0#

#pi/(y(1+r)) times ( (1+r)(1 + pi)-1) =1#

#(pi ( cancel((1+r))(1 + pi)-1))/(y cancel((1+r))) =1#

#pi^2/ y=1#

#pi=1 times y#

Now you have a choice:

Choice 1#" "pi= y#
Choice 2#" " pi= yB(1+r)#