Smith Savings and Loan is proud of its long tradition in Apopka, Florida. Begun by Laurie Shader-Smith thirteen years after World War II, the S&L has bucked the trend of financial and liquidity problems that have plagued the industry since 1988. Deposits have increased slowly but surely over the years, despite recessions in 1967, 1972, and 1987. Ms. Shader-Smith believes it necessary to have a strategic plan for her firm, including a one-year forecast of deposits. She examines the past deposit data and also peruses Florida's gross state product (GSP) over the same 44 years. [GSP is analogous to gross national product, (GNP) but on the state level.]

Using exponential smoothing with α = 0.6, predict deposits for 2003. Assume that the forecast for 1959 was 0.25. Compare this model with an exponential smoothing model with α = 0.2. Which model is better?

YEAR DEPOSITSGSP

1959 ......0.25 ......0.4

1960 ......0.24 ......0.4

1961 ......0.24 ......0.5

1962 ......0.26 ......0.7

1963 ......0.25 ......0.9

1964 ......0.30 ......1.0

1965 ......0.31 ......1.4

1966 ......0.32 ......1.7

1967 ......0.24 ......1.3

1968 ......0.26 ......1.2

1969 ......0.25 ......1.1

1970 ......0.33 ......0.9

1971 ......0.50 ......1.2

1972 ......0.95 ......1.2

1973 ...... 1.7 ......1.2

1974 ...... 2.3 ......1.6

1975 ...... 2.8 ......1.5

1976 ...... 2.8 ......1.6

1977 ...... 2.7 ......1.7

1978 ...... 3.9 ......1.9

1979 ...... 4.9 ......1.9

1980 ...... 5.3 ......2.3

1981 ...... 6.2 ......2.5

1982 ...... 4.1 ......2.8

1983 ...... 4.5 ......2.9

1984 ...... 6.1 ......3.4

1985 ...... 7.7 ......3.8

1986 ......10.1 ......4.1

1987 ......15.2 ......4.0

1988 ......18.1 ......4.0

1989 ......24.1 ......3.9

1990 ......25.6 ......3.8

1991 ......30.3 ......3.8

1992 ......36.0 ......3.7

1993 ......31.1 ......4.1

1994 ......31.7 ......4.1

1995 ......38.5 ......4.0

1996 ......47.9 ......4.5

1997 ......49.1 ......4.6

1998 ......55.8 ......4.5

1999 ......70.1 ......4.6

2000 ......70.9 ......4.6

2001 ......79.1 ......4.7

2002 ......94.0 ......5.0

Deposits in millions of dollars, GSP in billions of dollars.