Chap2Exercise3

Suppose the price of a stock at times 1, 2, and 3 are P1 = 95, P2 = 103, and P3 = 98. Find r3(2).

r3(2) = log(1+R3(2)) = log((1+R3)*(1+R2)) = log(1+R3)+log(1+R2) = r3 + r2 = log(P3/P2) + log(P2/P1) = log(P3/P1)

log(98/95)

## [1] 0.03109059