Question

Period 1 Fundamental Model: Predicted Value of Bulgarian lev Spot Rate Model: Predicted Value of Bulgarian...

Period 1

Fundamental Model: Predicted Value of Bulgarian lev

Spot Rate Model: Predicted Value of Bulgarian lev

Actual value of Bulgarian lev
1 US$ 0.52 US$ 0.50 US$ 0.50
2 $0.54 $0.50 $0.60
3 $0.44 $0.60 $0.50
4 $0.566 $0.50 $0.50

Using the mean % absolute forecast error, determine which model is better at forecasting the value of the Bulgarian lev.

Homework Answers

Answer #1

Mean % absolute error is calculated as average absolute percentage error for each time period. So, it is (summation of (A(i)-F(i))/A(i))/n; where A(i) is Actual value, F(i) is Forecast value and n is the number of time periods.

Calculating for Period Fundemental Model, we get (mod((0.5-0.52)/0.5)+mod((0.6-0.54)/0.6)+mod((0.5-0.44)/0.5)+mod((0.5-0.566)/0.5))/4= (0.04+0.1+0.12+0.132)/4= 0.098= 9.8%

Calculating for Spot Rate Model, we get (mod((0.5-0.5)/0.5)+mod((0.6-0.5)/0.6)+mod((0.5-0.6)/0.5)+mod((0.5-0.5)/0.5))/4= (0+0.166+0.2+0)/4= 0.091667= 9.1667%

So, as mean % absolute error of Period Fundemental Model is better, we can determine that Period Fundemental Model is better at forecasting the value of Bulgarian lev.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Find the hedge ratio a 1-period at-the-money put option on ¥300,000. The spot exchange rate is...
Find the hedge ratio a 1-period at-the-money put option on ¥300,000. The spot exchange rate is ¥100 = $1.00. In the next period, the yen can increase in dollar value by 15 percent or decrease by 10 percent. The risk-free rate in dollars is i$ = 5%; The risk-free rate in yen is i¥ = 1%. A.-0.44 B.-0.66 C.-0.60 D.-0.40
Consider the following time series data. Week 1 2 3 4 5 6 Value 18 14...
Consider the following time series data. Week 1 2 3 4 5 6 Value 18 14 16 12 17 14 Using the naive method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy. Round the intermediate calculations to two decimal places. Mean absolute error (to 1 decimal). Mean squared error (to 1 decimal). Mean absolute percentage error (to 2 decimals). % What is the forecast for week 7 (to the nearest whole...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 13...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 13 16 11 17 15 Using the average of all the historical data as a forecast for the next period, compute the following measures of forecast accuracy. Round your answers to two decimal places. a. Mean absolute error. b. Mean squared error. c. Mean absolute percentage error. % d. What is the forecast for week 7?
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14 17 12 18 15 Using the average of all the historical data as a forecast for the next period, compute the following measures of forecast accuracy. Round your answers to two decimal places. a. Mean absolute error. b. Mean squared error. c. Mean absolute percentage error. d. What is the forecast for week ?
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 12...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 12 15 11 17 15 Using the naïve method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy: Mean absolute error (MAE) Mean squared error (MSE) Mean absolute percentage error (MAPE) Round your answers to two decimal places. MAE = MSE = MAPE = Using the average of all the historical data as a forecast for the...
Consider the following time series data. Month 1 2 3 4 5 6 7 Value 22...
Consider the following time series data. Month 1 2 3 4 5 6 7 Value 22 14 20 11 20 22 14 Round your answers to two decimal places. a. Compute MSE using the most recent value as the forecast for the next period. Mean squared error is What is the forecast for month ? b. Compute MSE using the average of all data available as the forecast for the next period. Mean squared error is What is the forecast...
An attempt was made to evaluate the forward rate as a predictor of the spot rate...
An attempt was made to evaluate the forward rate as a predictor of the spot rate in the treasury bill market. For a smaple of 122 quarterly observations, the estimated linear regression (standard error in parentheses) S= -.002 + 0.8916F (.1759) was obtained where: S=actual change in spot rate F= change in spot rate predicted by the foward rate. Test, against a two-sided alternative, the null hypothesis that the slop of the population regression line is 1.0. i. State the...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14 16 11 18 15 Using the naive method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy. Round the intermediate calculations to two decimal places. Mean absolute error (to 1 decimal). Mean squared error (to 1 decimal). Mean absolute percentage error (to 2 decimals). % What is the forecast for week 7 (to the nearest whole...
A toy company buys large quantities of plastic pellets for use in the manufacturing of its...
A toy company buys large quantities of plastic pellets for use in the manufacturing of its products.  The production manager wants to develop a forecasting system for plastic pellet prices and is considering four different approaches and 6 different models.  He plans to use historical data to test the different models for accuracy.  The price per pound of plastic pellets (actual) has varied as shown: Month Price/Pound 1 $0.39 2 0.41 3 0.45 4 0.44 5 0.40 6 0.41 7 0.38 8 0.36...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14...
Consider the following time series data. Week 1 2 3 4 5 6 Value 19 14 17 10 17 13 Using the naive method (most recent value) as the forecast for the next week, compute the following measures of forecast accuracy. (a) mean absolute error MAE = (b) mean squared error MSE = (c) mean absolute percentage error (Round your answer to two decimal places.) MAPE = % (d) What is the forecast for week 7?