TABLE 16-14 a Contractor Developed a Multiplicative Time-Series Model to Forecast the Forecast

question 56

Multiple Choice

TABLE 16-14
A contractor developed a multiplicative time-series model to forecast the number of contracts in future quarters, using quarterly data on number of contracts during the 3-year period from 2008 to 2010. The following is the resulting regression equation:
ln Ŷ = 3.37 + 0.117 X - 0.083 Q₁ + 1.28 Q₂ + 0.617 Q₃
where Ŷ is the estimated number of contracts in a quarter
X is the coded quarterly value with X = 0 in the first quarter of 2008.
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 16-14, the best interpretation of the constant 3.37 in the regression equation is

• A) the fitted value for the first quarter of 2008, prior to seasonal adjustment, is log₁₀ 3.37.
• B) the fitted value for the first quarter of 2008, after to seasonal adjustment, is log₁₀ 3.37.
• C) the fitted value for the first quarter of 2008, prior to seasonal adjustment, is 10³.³⁷.
• D) the fitted value for the first quarter of 2008, after to seasonal adjustment, is 10³.³⁷.

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Definitions:

Proceeds

refer to the total amount of money received from transactions, often associated with the sale of goods, services, or assets.

Effective-Interest Method

A method of calculating interest that considers the compounding of interest, making it a more accurate measure of interest expense or income over the life of a financial instrument.

GAAP

Generally Accepted Accounting Principles, a standard framework of guidelines for financial accounting used in any given jurisdiction.

Bond Discounts

The financial difference observed when a bond's selling price is less than its stated face value upon sale.