The Wilson Company Is Interested in Forecasting Demand for Its

question 55

Multiple Choice

The Wilson Company is interested in forecasting demand for its XG-667 product for quarter 13 based on 12 quarters of data.The following shows the data and the double exponential smoothing model results for periods 1-12 using alpha = 0.20 and beta = 0.40. Based on this information,which of the following statements is true?

• A)If beta is changed to 0.20 and alpha remains at 0.20,the MAD for periods 2-12 is reduced.
• B)If beta is changed to 0.20 and alpha remains at 0.20,the forecast for period 13 is slightly reduced.
• C)The forecast bias for periods 2-12 is approximately 6.18.
• D)All of the above are true.

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Definitions:

Market Risk Premium

The supplementary income expected by investors when they choose to invest in a volatile market portfolio rather than in secure, riskless options.

Risk-Free Rate

The return on investment with zero risk, typically represented by yields on government securities.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates the stock is more volatile than the market.

Unsystematic Risk

The type of risk that is specific to a company or industry, which can be minimized through diversification.