Homework

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Homework MAN 3504

Report format for Homework

1. Prepare a front page with only the results. Your answer for the first two questions
would contain the following details:
 recommended method (e.g. exponential smoothing)
 method parameters (e.g., in above case, value for “alpha”)
 your MAD and TS
Further, your answer for the regression should have 5 lines for the five questions.
(Regression Dataset included in separate file)

2. Then attach the supporting documents for your results such as computer printouts.
For problem 1 and 2, you would have 2 pages each (thus, a total of 4). One would
be the results summary page from OMExplorer and one page for regression. For
problem 2, you would have one page printout for the regression results (that
would take total pages to 5. Including the cover/front page as described above,
your report should have a total of 6 pages).

Problem 1:

The trend in interest rates over the past decade has been generally downward. So as
mortgage interest rates dip, homeowners consider refinancing home loans. Suppose that
the manager of a given bank is interested in forecasting the number of homeowners
refinancing their home mortgage for a better interest rate.

Year # Refinanced Year # Refinanced
1986 85 1994 116
1987 40 1995 178
1988 123 1996 132
1989 96 1997 190
1990 167 1998 112
1991 112 1999 145
1992 134 2000 150
1993 200 2001 135

Develop a forecast model using the method you believe best, and justify your selection
using a measure (or measures) of forecast accuracy.

(35 Points)
Problem 2:
1
This data is from the Best Buy Co., Inc. Best Buy (NYSE:BBY), headquartered in Eden
Prairie, Minnesota, is the largest volume specialty retailer of consumer electronics,
personal computers, entertainment software, and appliances. In August of each year, Best
Buy purchases mainframe MIPS (MIPS, millions of instructions per second, are a
measure of computing resources) in anticipation of the coming holiday season. For
planning and budgeting purposes they also wish to forecast the number of MIPS needed
the following year.

Best Buy Corporation actually used this data to predict computer usage in order to budget
for and purchase an appropriate amount of computing power. Develop a forecasting
method for the given data.

Date MIPS Date MIPS
1-Aug-96 145.2 1-Aug-98 266.4
1-Sep-96 150.5 1-Sep-98 218.9
1-Oct-96 153.1 1-Oct-98 254.8
1-Nov-96 136.1 1-Nov-98 269.1
1-Dec-96 152.6 1-Dec-98 297.3
1-Jan-97 143.5 1-Jan-99 274.5
1-Feb-97 145.9 1-Feb-99 279.4
1-Mar-97 148.3 1-Mar-99 292.3
1-Apr-97 159.1 1-Apr-99 305.7
1-May-97 165.1 1-May-99 304.9
1-Jun-97 167.5 1-Jun-99 347.8
1-Jul-97 179.1 1-Jul-99 358
1-Aug-97 192.9 1-Aug-99 393.5
1-Sep-97 197.9 1-Sep-99 428.2
1-Oct-97 212 1-Oct-99 432.6
1-Nov-97 191.1 1-Nov-99 453.8
1-Dec-97 219.5 1-Dec-99 531.8
1-Jan-98 196.1 1-Jan-00 472.3
1-Feb-98 212 1-Feb-00 436.5
1-Mar-98 226.6 1-Mar-00 470.4
1-Apr-98 214.1 1-Apr-00 425
1-May-98 206.6 1-May-00 416.6
1-Jun-98 218.3 1-Jun-00 485.1
1-Jul-98 235 1-Jul-00 488.5

(40 Points)

1
Adapted from “Forecasting computer usage” by Julie M Hays in Journal of Statistics
Education Volume 11, Number 1 (2003)
Problem 3:
The following gives the description of the data-set. Choose any one of the data-set and
obtain a regression equation. Based on the excel output, answer the following questions:
1. Is the regression equation statistically significant at a 10% level
2. Is the independent variable a statistically significant predictor of the dependent
variable (at a 10% level)
3. What percentage of variation in dependent variable is explained by the independent
variable
4. Irrespective of whether the regression equation is significant or not, state the
regression equation (not in terms of X and Y, but in terms of actual variables)
5. Irrespective of whether the regression equation is significant or not, use the equation
to answer the question that appears following the respective data-set description
(5 Points Each)

Hydration
Health experts recommend that runners drink 4 ounces of water for every 15 minutes they
run. Runners who run 3-8 hours needs larger-capacity hip-mounted or over-the-shoulder
hydration systems. The data show the capacity (independent variable) of the hydration
system (in fl oz) and the price (dependent variable) for the top 26 hydration systems
available.
Suppose your company comes up with a 25 fl oz hydration system. Estimate the price at
which the company should sell this product.

Beer
The data shows media expenditure (independent variable) and shipments (dependent
variable) in bbls. (millions).
Suppose your company’s media expenditure budget is 52,540,000 dollars. Estimate how
much you are likely to ship (and hence, how much you should produce)

Weather
The data is daily high (dependent variable) and low temperatures (independent variable)
for 20 cities.
Let’s suppose the low temperature for a particular day was 45. What would you expect
the high for that day?