FRED® (Federal Reserve Economic Data), a database of more than 3000 U.S. economic time series, contains historical data on foreign exchange rates. The following data show the foreign exchange rate for the United States and China (research.stlouisfed.org/fred2/). The units for Rate are the number of Chinese yuan renmimbis to one U.S. dollar.

a. Construct a time series plot. Does a linear trend appear to be present?
b. Use Excel Solver or LINGO to find the parameters for the line that minimizes MSE this time series.
c. Use the trend equation to forecast the exchange rate for August 2008.
d. Would you feel comfortable using the trend equation to forecast the exchange rate for December2008?

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Year 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 Month October November December January February March April May June July Rate 7.5019 7.4210 7.3682 7.2405 7.1644 7.0722 6.9997 6.9725 6.8993 6.8355