Instruction 14-4
a Contractor Developed a Multiplicative Time-Series Model to Forecast

question 175

Multiple Choice

Instruction 14-4
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:
$\log _ { 10 } \hat { Y } = 3.37 + 0.117 X - 0.083 Q _ { 1 } + 1.28 Q _ { 2 } + 0.617 Q _ { 3 }$
Where
$$\hat { Y }$$ 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 Instruction 14-4,to obtain a forecast for the first quarter of 2011 using the model,which of the following sets of values should be used in the regression equation?

• A)X = 13,Q₁ = 1,Q₂ = 0,Q₃ = 0
• B)X = 12,Q₁ = 1,Q₂ = 0,Q₃ = 0
• C)X = 12,Q₁ = 0,Q₂ = 0,Q₃ = 0
• D)X = 13,Q₁ = 0,Q₂ = 0,Q₃ = 0

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Definitions:

Net Income

Net income is the total profit of a company after subtracting all expenses, taxes, and costs from its total revenue.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation, with voting rights at shareholder meetings.

Cash Dividend

A payment made by a corporation to its shareholders, usually in the form of cash, as a portion of the company's profits.

Earnings Per Share

A financial ratio that calculates the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of the company’s profitability.