TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 2005 to 2009. The following is the resulting regression equation:

-Referring to Table 16-13, the best interpretation of the coefficient of X (0.012) in the regression equation is:
A) the quarterly compound growth rate in revenues is around 2.8%.
B) the annual growth rate in revenues is around 2.8%.
C) the quarterly growth rate in revenues is around 1.2%.
D) the annual growth rate in revenues is around 1.2%.

Question

TABLE 16-13
A local store developed a multiplicative time-series model to forecast its revenues in future quarters, using quarterly data on its revenues during the 4-year period from 2005 to 2009. The following is the resulting regression equation:

-Referring to Table 16-13, the best interpretation of the coefficient of X (0.012) in the regression equation is:
A) the quarterly compound growth rate in revenues is around 2.8%. 
B) the annual growth rate in revenues is around 2.8%. 
C) the quarterly growth rate in revenues is around 1.2%. 
D) the annual growth rate in revenues is around 1.2%.

Quizplus · Accepted Answer

The coefficient of X (0.012) in the regression equation represents the quarterly compound growth rate in revenues. To convert this to an annual growth rate, we need to multiply by 4 (since there are 4 quarters in a year). Therefore, the annual growth rate in revenues is around 2.8% (0.012 * 4 = 0.048, or 4.8%).

TABLE 16-13 A Local Store Developed a Multiplicative Time-Series Model to Forecast