4th Question

Consider the model

y_t = .7 y_{t-1} +.2 y_{t-1} + \epsilon_t

where \epsilon_t is forcing 

a. Take the homogeneous equation and solve it and discuss the
   stability of the system

b. Write in lag operator form and solve the quadratic in L. Compare
   the results with a.

c. Using L notation, rewrite the difference equation and solve for y_t