The following time series, provided by the Federal Loan Home Mortgage Corporation, represent weekly 30-year fixed mortgage rates.

Date (week) Mortgage Rate (%)

October 14, 2005 6.03

October 21, 2005 6.10

October 28, 2005 6.15

November 4, 2005 6.31

November 11, 2005 6.36

November 18, 2005 6.37

November 25, 2005 6.28

December 2, 2005 6.26

December 9, 2005 6.32

December 16, 2005 6.30

December 23, 2005 6.26 December 30, 2005 6.22 January 6, 2006 6.21 January 13, 2005 6.15

(1 point each for parts a-c)

1. Use a 2-period moving average to forecast the next weekly mortgage rate.

2. Use a 3-period moving average to forecast the next weekly mortgage rate.

3. Use a 4-period moving average to forecast the next weekly mortgage rate.

4. (3 points) Which averaging period provides a better historical fit based on the MAD criterion? Show the MAD for each of the above methods.

5. (2 points) Use exponential smoothing with a smoothing constant of 0.5 to forecast the next weekly mortgage rate.

6. (3 points) What is the linear trend equation that best fits the data?

7. (2 point ) What is the forecast of the next weekly mortgage rate using the linear trend method

8. ( 2 points) What is the MAPE for this method? (show your work or include the software answer).