Question

You are hired as a consultant to assess a firm’s ability to forecast. The absolute forecast error is the absolute value of a percentage of the realized value.

End of Month	Australian Dollar Forecasted	Australian Dollar Actual
1	$0.8125	$0.8115
2	0.8137	0.8158
3	0.8407	0.8417
4	0.8581	0.8370
5	0.8571	0.8562
6	0.8572	0.8432

What is mean absolute forecast error for the Australian Dollar?

Group of answer choices

0.9173%

0.7976%

0.7258%

0.9651%

0.7897%

Answer 1

The formula used to calculate the mean absolute forecast error in percentage is :

Where, n is the number of terms, At is the actual value and Ft is the forecasted value.

Thus, calculating each term individually in the above formula, we get:

Thus, value of M = 1/6 * 0.04785817 = 0.0079764

Thus, the mean absolute forecast error for the Australian Dollar is 0.7976% (The second choice)