Assume the following information:
Predicted Value of Realized Value of
Period New Zealand Dollar New Zealand Dollar
1 $.52 $.50
2 .54 .60
3 .44 .40
4 .51 .50
Given this information,the mean absolute forecast error as a percentage of the realized value is about:
A) 1.5%.
B) 26%.
C) 6%.
D) 6.5%.
E) none of the above

Question

Quizplus · Accepted Answer

To calculate the mean absolute forecast error as a percentage of the realized value, we need to first calculate the absolute forecast error as the absolute difference between the predicted value and realized value, and then divide it by the realized value and multiply by 100 to convert it into a percentage.

For Period 1:
Absolute forecast error = |.50 - .52| = .02
% error = (.02/.50) * 100 = 4%

For Period 2:
Absolute forecast error = |.60 - .54| = .06
% error = (.06/.60) * 100 = 10%

For Period 3:
Absolute forecast error = |.40 - .44| = .04
% error = (.04/.40) * 100 = 10%

For Period 4:
Absolute forecast error = |.51 - .50| = .01
% error = (.01/.50) * 100 = 2%

Mean absolute forecast error as a percentage of the realized value = (4% + 10% + 10% + 2%)/4 = 6.5%, which is closest to Choice D.

Assume the Following Information