A Large Automobile Parts Supplier Keeps Track of the Demand

question 1

Multiple Choice

A large automobile parts supplier keeps track of the demand for a particular part needed by its customers, automobile manufacturers. The time series plot below shows monthly demand for this part (in thousands) for a five-year period. The dominant component(s) in this time series is(are)

• A) cyclical.
• B) irregular.
• C) seasonal and trend.
• D) cyclical and irregular.
• E) No time series component is dominant. The time series is random walk.

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Definitions:

Risk

The potential for loss or unfavorable outcomes in any given situation, often assessed in finance as the variability of returns on investments.

Return

Return refers to the gain or loss on an investment over a specific period, including income received and the change in value, usually expressed as a percentage of the investment’s initial cost.

Investment Horizon

Time horizon for purposes of investment decisions.

Liquidated

Converted assets into cash or paid off a debt, often referring to the process of closing a business and distributing its assets to claimants.