1. Use the Holts approach.

(i) Pretend that only the first 4 data points were collected. You need to determine F(4+1), F(4+2), and F(4+3). With alpha = 0.55, and gamma = 0.22 make these forecasts. Perform all the steps needed based on Holts, and show your work.

(ii) Since management needs to plan the loan funds availability based on loan request forecasts, it wants the best Holts model. Determine the best performing Holts model based on MSE. Use the Data Table Excel tool (use increments of 0.1 for alpha and gamma).

As a matter of policy, management will approve requests for loans up to a total of $1,900,000 a month (which, in our data set, will be a value of 1900 since the data appear in thousands). For each of the next three months (t=26, 27, 28) how confident can the bank be all the loan requests will be approved by the bank (provide the largest confidence possible in each month? There may be different confidence levels among the months. Use the model you found in question b(ii) above (that is, the optimal model). You can use trial and error with the template, or goal seek. If your search use up to three decimal digits (for example, 0.755).