Question

A consulting firm estimates the following quarterly sales forecasting model: lx = a + bt + CD The equation is estimated using quarterly data from 200101-2020111 (t = 1,..., 43). The variable D is a dummy variable for the second quarter where: D = 1 in the second quarter, and 0 otherwise. The results of the estimation are: P-VALUE ON DEPENDENT VARIABLE: QT R-SQUARE OBSERVATIONS: 43 0.8644 PARAMETER VARIABLE ESTIMATE INTERCEPT 22.50 1.86 2.00 F-RATIO 127.5 STANDARD ERROR 9.32 0.55 0.71 0.0001 T- P- RATIO VALUE 2.41 0.0201 3.38 0.0016 2.82 0.0075 Using the estimated trend line above, what is the predicted level of sales in 20200V? A) 110.06 B) 106.20 C) 104.34 D) 102.2 E) None of the choices are correct

Answer 1

Qt=a+bt+cD

Qt=22.50+1.86T+2D

when we talk about 2020 4th quarter then t=44 and it is the third quarter due to which dummy variable value will be 0

Thus D=0

and Qt=22.50+1.86(44)+0=104.34

Ans is C