investment science 2nd edition

For example, when purchasing a house, a young couple may focus on unique physical risks such as whether the house is on solid soil or on financial risks such as whether the housing market will fall. The house is expected to last forever. If the period length is not equal to 1 year, this r will not be equal to the yearly rate; so care must be exercised. See Exercise 4. It is based on approximating the functionfby a line tangent to its graph at Ay, as shown in Figure 2.

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