A tourism specialist uses decomposition analysis to examine hotel occupancy rates for Bar Harbor, Maine. She collects quarterly data for the past five years (n = 20)

and finds that the linear trend model best captures the trend of the seasonally adjusted series: In addition, she calculates quarterly indices as

Ŝ = 0.53, Ŝ2 = 0.90, Ŝ 3 = 1.40, and Ŝ 4 = 1.17.

a. Interpret the first and third quarterly indices.

b. Forecast next year’s occupancy rates.