A supermarket chain (FRESHM) funds the purchase of merchandise monthly by bank loans. Monthly loan data were collected over the last 25 months. See the data at the end of this assignment. Answer the following questions:

a. Use the linear regression approach

1.A test for the presence of linear trend was run. From the computer output answer. Which statement is correct?

a.R sq = 0.78. This is clearly more than 0.05. There is a linear trend

b.P value for the intercept = 7.81E-18. This is clearly small, so the intercept is not zero. There is linear trend.

c.P value for 'Loans' = 4.42E-09 < 0.05. Beta1 is not zero, so there is a linear trend.

d.None of the above

2.For the regression equation you have created in question 1, what does the estimated slope of this equation tell you in this particular problem? Answer in the Answers sheet.

3.Use the regression equation of part '2' (not the template results) to make a prediction of expected loans for each of the next three months (months 26, 27, and 28). Answer in the Answers sheet. Show your calculations.

4.FRESHM wants to be 95% confident that it does not borrow less than the amount of funds actually needed, in any of the next three months (26, 27, 28). What loan is the minimum amount FRESHM have to borrow monthly, to meet the confidence requirement in each of the next three months? (Use the template!).

a.Already calculated above in a-3.

b.1424.83 in each month

c.1401.82, 1424.83, and 1447.70, in the three months respectively

d.None of the above

b.Use the Holt's approach.

5.Determine the best value of alpha and gamma, for the MAE criterion. Show your work on a spreadsheet.

6.For the model you obtained in question '5' using the optimal alpha and gamma, you should get L₂₅ =1766.89, and T₂₅ =66.88.Which statement is correct?

a.The local slope is L₂₅/T₂₅ = 1766.89/66.88 = 26.42

b.The intercept (namely, the time series at t=0) is estimated to be 1766.89 as of t=25

c.The average slope at t=25 is 66.88/25.

d.At t=25 the monthly loan is estimated to rise by 66880 dollars per month.

7.Use L₂₅ =1766.89 andT₂₅ = 66.88 from the template of the model you obtained in question '5' to calculate the forecast of loans for months 26, 27, and 28.

Show your calculations.

8.As a matter of policy, management will approve borrowing up to a total of $1,900,000 for next month (month 26). How confident can management be that this loan amount will be sufficient to purchase the merchandise required that month? You can use trial and error, or goal seek with the template.

The time series data

Month

Loan

in 1000$

Month

Loan

in 1000$

1

1156

14

1264

2

1101

15

1235

3

1195

16

1357

4

1072

17

1373

5

1237

18

1358

6

1106

19

1489

7

1148

20

1428

8

1005

21

1516

9

1350

22

1681

10

1115

23

1598

11

1196

24

1699

12

1298

25

1781

13

1260

Comment: Select this table then paste into an excel sheet as is, then organize the data in one column so that you can use the template or run regression.