The following is a table of quarterly sales for a company for the last four years.

Use a regression model to predict the sales in 1998.

Year Sales Quarter 1 Quarter 2 Quarter 3 Quarter 4 1994 1,000 800 550 1,600 1995 1,105 890 630 1,808 1996 1,180 970 780 1,950 1997 2,050 1,020 830 To do this make use of dummy variables to represent the quarter, that is create a variable D1 that will have the value 1 if it refers to quarter 1 and zero otherwise.

Similarly create variables D2 and D3 to represent quarters 2 and 3. We do not need a variable for quarter 4 because if D1, D2 and D3 are all 0, then this implies quarter 4.