A First-Order Autoregressive Model, AR (1) Was Fit to Monthly

question 26

Multiple Choice

A first-order autoregressive model, AR (1) was fit to monthly closing stock
Prices, adjusted for dividends, of Boeing Corporation from January 2006 through August
2008 (closing price on the first trading day of the month) . Based on the results shown
Below, the forecast a month in which the previous month's closing price was $67.52 is $$\begin{array}{l}\text { Final Estimates of Parameters }\\\\\begin{array} { l r r r r r } \text { Type } & \text { Coef } & \text { SE Coef } & \text { T } & \text { P } \\\text { AR } 1 & 0.9098 & 0.0969 & 9.39 & 0.000 \\\text { Constant } & 6.835 & 1.207 & 5.67 & 0.000\end{array}\end{array}$$

• A) $74.06
• B) $68.26
• C) $65.67
• D) $71.25
• E) Cannot be determined from the information given.

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Definitions:

Prediction Interval

An estimate of an interval in which future observations will fall, with a certain probability, given what has already been observed.

Simple Linear Regression

A statistical method used to model the relationship between a single independent variable and a dependent variable by fitting a linear equation to observed data.

T-Table Values

Critical values used in t-tests that determine the thresholds for significance based on the sample size and desired confidence level.

Confidence Level

The percentage that expresses the degree of certainty in the reliability of a confidence interval.