Bond Interest Rates and Trend Analysis Plot Exercises

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Bond Interest Rates. Corporate triple-A bond interest rates for 12 consecutive months follow.

• Construct a time series plot. What type of pattern exists in the data?
• Develop three-month and four-month moving averages for this time series. Does the three-month or four-month moving average provide more accurate forecasts based on MSE? Explain.
• What is the moving average forecast for the next month?

Sales Forecasts. The following time series shows the sales of a particular product over the past 12 months.

• Construct a time series plot. What type of pattern exists in the data?
• Use alpha=0.3 to compute the exponential smoothing forecasts for the time series.
• Use a smoothing constant of alpha=0.5 to compute the exponential smoothing forecasts. Does a smoothing constant of .3 or .5 appear to provide more accurate forecasts based on MSE?

Administrative Expenses. The Seneca Children’s Fund (SCF) is a local charity that runs a summer camp for disadvantaged children. The fund’s board of directors has been working very hard in recent years to decrease the amount of overhead expenses, a major factor in how charities are rated by independent agencies. The following data show the percentage of the money SCF has raised that was spent on administrative and fund-raising expenses for a seven-year period.

• Construct a time series plot. What type of pattern exists in the data?
• Develop the linear trend equation for this time series.
• Forecast the percentage of administrative expenses for year 8.
• If SCF can maintain their current trend in reducing administrative expenses, how long will it take them to achieve a level of 5% or less?