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:

Holder In Due Course

A legal term referring to an individual who has taken possession of a negotiable instrument in good faith, with the belief that it is valid, for value, and without notice of any defects.

Judicial Sale

A sale conducted under the supervision of a court where the property is sold to satisfy a judgment or to execute a court order.

Preceding Claim

A claim or legal demand made or recognized before another in time.

Without Recourse

A term indicating that the holder of a financial instrument cannot demand payment from the original issuer in case of default.