A consulting firm estimates the following quarterly sales forecasting model: The equation is estimated using quarterly data from 2005I-2015III t = 1,...,43).The variable D is a dummy variable for the second quarter where: D = 1 in the second quarter,and 0 otherwise.
The results of the estimation are:
Using the estimated trend line above,what is the predicted level of sales in 2015IV ?
A)110.06
B)106.20
C)104.34
D)102.2
E)none of the above

Question

A consulting firm estimates the following quarterly sales forecasting model:  The equation is estimated using quarterly data from 2005I-2015III t = 1,...,43).The variable D is a dummy variable for the second quarter where: D = 1 in the second quarter,and 0 otherwise.
The results of the estimation are:
 Using the estimated trend line above,what is the predicted level of sales in 2015IV ?
A)110.06 
B)106.20 
C)104.34 
D)102.2 
E)none of the above

Quizplus · Accepted Answer

To find the predicted level of sales in 2015IV, we need to substitute t=44 (since 2015IV is the 44th quarter) in the estimated trend line equation:
Sales = 61.3 + 1.6(44) - 2.2(D)
D = 0 (since 2015IV is not the second quarter)
Sales = 61.3 + 1.6(44) - 2.2(0)
Sales = 104.34
Therefore, the predicted level of sales in 2015IV is 104.34. The answer is C.

A Consulting Firm Estimates the Following Quarterly Sales Forecasting Model