A.     What is ã₀, the variance of Y_t? Show the derivation.

B.     What is ã₁, the covariance of Y_t and Y_t-1? Show the derivation.

C.    What is ñ₂, the correlation of Y_t and Y_t-2? Show the derivation.

 

(Show the algebra for the derivations. One or two lines is sufficient for each part.)

 

 

@dom2114: Thank you. I had figured that out myself, but appreciate you mentioning it. I was making a different mistake and started to doubt that part that I had done right.

@djfobster: I got the same answer for C.

@DMW: It's not -0.345/9. gamma0 does NOT equal 9. sigma-squared = 9.