Time-Series Models May Exhibit Seasonal Effects or Cyclical Effects

question 8

Multiple Choice

Time-series models may exhibit seasonal effects or cyclical effects. A seasonal effect differs from a cyclical effect in that a seasonal effect:

• A) has no trend, is relatively constant, and only exhibits random behavior.
• B) describes ups and downs over a time frame such as several years.
• C) is one that repeats at fixed intervals of time, typically a year, month, week, or day.
• D) is based on analysis of historical time-series data and are predicated on the assumption that the future is an extrapolation of the past.

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Definitions:

Double-Declining-Balance Method

A form of accelerated depreciation where an asset loses value at twice the rate of the traditional straight-line method.

Depreciation

Methodically dividing the cost of a tangible asset throughout its effective life.

Residual Value

The estimated amount that an asset will be worth at the end of its useful life, after it has been fully depreciated.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly.