A Time Series Regression Equation Measuring the Number of Surfboards

question 40

Multiple Choice

A time series regression equation measuring the number of surfboards sold by a surfboard manufacturing company in Australia is given below:
Y = 35 + 4Q₁ + 0.5Q₃ + 8Q₄ + 3t
With t in quarters and the origin is December 2010 and Q₁ is the indicator variable for March, Q₃ is the indicator variable for September and Q₄ is the indicator variable for December.
Which of the following statements is correct regarding the trend component?

• A) There were 43 surfboards sold in December 2010, and this increases by 3 surfboards per quarter, irrespective of the season of the year.
• B) There were 35 surfboard sold in December 2010, and this increases by 15.5 surfboards per quarter, irrespective of the season of the year.
• C) There were 35 surfboard sold in December 2010, and this increases by 3 surfboards per quarter, irrespective of the season of the year.
• D) None of these choices are correct.

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Definitions:

Call's Value

Represents the price of an option to buy a particular stock or asset at a set price within a specific time frame.

ESOs

Employee Stock Options; the right granted to employees to buy a set amount of company shares at a fixed price.

Job Leaving

This refers to the act of an employee voluntarily terminating their employment with a company.

American Call Option

An option contract that allows the holder to buy an asset at a specific price before or at the expiration of the option.