A Time Series Regression Equation Measuring the Number of Surfboards

question 49

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:

Spot Rate

The current market price used to directly exchange one currency for another, for immediate delivery.

Forward Rate

The agreed-upon exchange rate for a currency transaction that will occur at a future date.

Average Rate

The average rate is a mean exchange rate over a specified period, used for accounting purposes to convert foreign currencies into the functional currency.

Foreign Exchange Gain

A profit resulting from changes in the exchange rate between the base currency and the foreign currency in which a transaction is denominated.