Question

1. A firm has developed forecasts for the yen for each of the four quarters of a year.

Quarter      Yen forecast        Yen actual value     Pound forecast    Pound actual value

1              $.0050                     $.0051                  $1.50                      $1.51

2              $.0048                     $.0052                  $1.53                      $1.50  

3              $.0053                     $.0052                  $1.55                      $1.58

4.           $.0055                     $.0056                  $1.49                      $1.52

1. Calculate the absolute forecast errors in percentage terms for each quarter for both the yen and the pound. Then calculate the mean absolute forecast error over the four years for each currency.

2. Which currency forecasts were more accurate?

Answer 1

in % 1. fore cast errors terms = Cal Absolute actual - for cast x 100 Actual Quarter yen Yen forecast Actual value I absolute forcast errors(%) for - Yen 1 poond Actual forcast pound value absolute forcost errors : for pound 0.0051-0.0050 $ 0.0050 $0.00 SL $ 1.51 -*100 $ 1.50 1.51-1.50 - X100 1.51 0.0051 = 1.960 = 0.66:12 2 $0.00 48 $0.0053 0.0052-0.0048 - X 100 $1.53 $1.50 oooosa 1.50 -1.53 XIDO 1.5o = 7.69% = 27- 3 $0.0053 $ 0.0052 0.0052-0.0053 x 100 $ 1.55 0.0052 $1.58 1.58-1.55 1.58 -X100 = 1.92.70 = 1.90.6 mean absolute forecast wor total forcast errors No of quarters For yen = 1.961. + 7.69%. + 1.92%. 3 For yen a 11.57 -3.856%

For pound = 0.664 + 2), t l90%. for pound 4.56%. = 1,524, (b) Pound Currency's for cast were more accurate it's lower mean for cast absolute due to error @ 1.52.. than yen currency @ 3.256)