Question

Corporate triple A bond interest rates for 12 consecutive months are as follows:

9.4

9.4

9.3

9.7

9.8

9.5

10

10.5

10

9.5

9.6

9.8

If required, round your answer to two decimal places.

(a)	Choose the correct time series plot.
	(i) (ii) (iii) (iv)
	- Select your answer -Graph (i)Graph (ii)Graph (iii)Graph (iv)Item 1
	What type of pattern exists in the data?
	- Select your answer -Positive trend patternHorizontal patternVertical patternNegative trend patternItem 2
(b)	Develop three-month and four-month moving averages for this time series.
	If required, round your answers to two decimal places.
	Month Sales 3 Month Moving Average 4 Month Moving Average 1 9.4 2 9.4 3 9.3 4 9.7 5 9.8 6 9.5 7 10 8 10.5 9 10 10 9.5 11 9.6 12 9.8
	Enter the Mean Square Errors for the three-month and the four-month moving average forecasts. If needed, round your answers to three decimal digits.
	3-month moving average 4-month moving average MSE
	Does the three-month or the four-month moving average provide the better forecasts based on MSE? Explain.
	- Select your answer -3-month moving average4-month moving averageItem 22
	- Select your answer -Moving average with the lowest MSE provides the better forecast.Moving average with the highest MSE provides the better forecast.Item 23
(c)	What is the moving average forecast for the next month?

Answer 1

a)

horizontal

b)

		3 period	4 period
month	interest rates		forecast
1	9.4
2	9.4
3	9.3
4	9.7	9.37
5	9.8	9.47	9.45
6	9.5	9.60	9.55
7	10	9.67	9.58
8	10.5	9.77	9.75
9	10.00	10.00	9.95
10	9.50	10.17	10.00
11	9.60	10.00	10.00
12	9.80	9.70	9.90

MSE for 3 month =0.166

MSE for 4 month =0.161 (please try 0.160 if this comes wrong)

4-month moving average is better ,Moving average with the lowest MSE provides the better forecast

c(

e moving average forecast for the next month=(10+9.5+9.6+9.8)/4= 9.73