Part II: Solve each problem in the space provided. Be sure to WRITE CLEARLY and

Question

Part II: Solve each problem in the space provided. Be sure to WRITE CLEARLY and SHOW YOUR WORK. (70 points total, each worth 14 points) Problem 1: Median household income (in thousands of dollars) for each of the past 5 years are shown in the following table. Median Income Y $25 $30 $27 532 $35 Year t 2 3 4 5 Use a two-year moving average to forecast median household income for years 3, 4, and 5.(7 points) a. 14. Use exponential smoothing with an alpha of 0.4 to forecast median household income for years 2, 3, 4, and 5. (7 points) b.

Explanation / Answer

a)here as two year moving average =(sum of last 2 month average)/2

b)

for exponential distribution ; forecast =alpha*last month actual+(!-alpha)*last month forecast

Time period Actual Value(A) Moving avg. Forecast(F) 1 25 2 30 3 27 27.5 4 32 28.5 5 35 29.5

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