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1. Suppose that liquor sales is estimated using a seasonal model given by: Liquor Sales = 30 + 3*FALL + 5*

DRQ #12 November 11, 2010 (5pts). 1. Suppose that liquor sales is estimated using a seasonal model given by: Liquor Sales = 30 + 3*FALL + 5*SPRING – 2*SUMMER, where Fall, Spring, and Summer are dummy variables. Winter is the base season.

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1. Suppose that liquor sales is estimated using a seasonal model given by: Liquor Sales = 30 + 3*FALL + 5*

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  1. DRQ #12 November 11, 2010 (5pts) 1.Suppose that liquor sales is estimated using a seasonal model given by: Liquor Sales = 30 + 3*FALL + 5*SPRING – 2*SUMMER, where Fall, Spring, and Summer are dummy variables. Winter is the base season. • (0.5pt) (a)Our forecast for liquor sales in the winter is __________ ? (0.5pt) (b) Our forecast for liquor sales in the spring is __________ ? • (0.5pt)(c) Suppose now that the base season is the Summer What is the new intercept value in the regression, • Liquor Sales = b0 + b1FALL + b2SPRING + b3WINTER + et? • 2. Suppose the total sales for a local grocery store from Monday to Friday are given as: • Day Monday Tuesday Wednesday Thursday Friday • Amount$90,000 $95,000 $98,000 $100,000 $105,000 • (0.5pt) (a) Give the general model representation of a MA(2) process. • (0.5pt) (b) Calculate the MA(2) prediction sales for Thursday.

  2. DRQ #12 November 11, 2010 (5pts) 3. Suppose we wish to analyze the Euro to U.S. dollar exchange rate. The exchange rate deals with the number of Euros per U.S. dollar. In conducting this analysis, suppose the following regression results are obtained: Model 1Euro USt = .15 + .8 Euro USt-1 MAD = 0.21 Model 2 Euro USt = -.59 + 1.3 EuroUSt-1 + .6 Euro USt-2 MAD = 0.18 The variable Euro UStrepresents the Euro to U.S. dollar exchange rate at time period t. (0.5pt) (a) What is the technical name of Model 1? (0.5pt) (b) What is the technical name of Model 2? • (1 pt) (c) Suppose that Euro to U.S. dollar exchange rates for May 2010 and June 2010 were 0.7 and 0.8 respectively. Forecast the exchange rate for July 2010 using Model 1 and Model 2. (0.5pts) (d)Which model is preferred? Why?

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