A State University Credit Union handles saving accounts and makes loans to members. In order to plan its investment strategies, the credit union needs to forecast monthly loans requests. Monthly Loan requests in millions of dollars were recorded for the last two years and are presented in the data set at the last page. Answer the following questions:

Problem

1.Two models are suggested: (i) Exponential smoothing with alpha = 0.2 or (ii) Exponential smoothing with alpha = 0.6. Use the template and the MAPE criterion (you do not need to calculate anything by hand). Which model works better and why? Select the correct answer below (read the entire answer):

a.Expon. Smooth. with alpha = 0.2, because its MAPE is larger than its MSE, indicating a better performance.

b.Expon. Smooth. with alpha = 0.6 because the weight we give to the recent data is larger than this weight in the other model, indicating a better performance.

c.Expon. Smooth. with alpha = 0.2, because its MAPE= 8.6, while

MAPE of the other model is = 8.86, indicating a better performance.

d.Expon. Smooth with alpha = 0.2, for a reason not mentioned above.

This is the time series: Copy and paste the values into your template (you can copy all the column as one selection. Don't copy the 't' column)

1.34

1.5

1.48

1.78

1.59

1.5

1.42

1.85

1.77

1.52

1.42

1.41

1.58

1.31

1.55

1.39

1.45

1.74

1.68

1.38

1.45

1.43

1.43

1.48