TABLE 16-12 A Local Store Developed a Multiplicative Time-Series Model to Forecast

question 46

Multiple Choice

TABLE 16-12
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 2005 to 2009. The following is the resulting regression equation:
log₁₀ = 6.102 + 0.012 X - 0.129 Q₁ - 0.054 Q₂ + 0.098 Q₃
where is the estimated number of contracts in a quarter.
X is the coded quarterly value with X = 0 in the first quarter of 2005.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Table 16-12, to obtain a fitted value for the fourth quarter of 2006 using the model, which of the following sets of values should be used in the regression equation?

• A) X = 7, Q₁ = 0, Q₂ = 0, Q₃ = 0
• B) X = 7, Q₁ = 1, Q₂ = 0, Q₃ = 0
• C) X = 8, Q₁ = 0, Q₂ = 0, Q₃ = 0
• D) X = 8, Q₁ = 1, Q₂ = 0, Q₃ = 0

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Definitions:

Redeemed

The process of paying off or buying back something, often referring to repaying the principal amount of bonds or preferred stocks.

Product Warranty

A product warranty is a promise made by a seller to a buyer to repair or replace a product within a specified period if it fails to meet the terms of the warranty.

Warranty Repairs

Services provided to fix defects in goods sold within a specified period, at no cost to the customer, under the terms of a warranty agreement.

Adjusting Entry

An accounting entry made at the end of an accounting period to allocate income and expenditure to the correct period.