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Suppose the simple return of a monthly bond index follows the MA (1) model: r_t =...

Suppose the simple return of a monthly bond index follows the MA (1) model: r_t = a_t - 0.2a_t-1 We know the standard deviation of the white noise sigma = 0.025. Assume that a_100 = 0.01. Calculate the value of the 1-step and 2-step ahead forecast at time t = 100. Calculate the standard deviation of the associated forecast errors. Finally, compute the numerical values for the lag-1 and lag-2 autocorrelation of the return time series.

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