Prediction the value of Y for the 1st quarter of 1999.
Explain a contractor developed a multiplicative time series model to forecast the number of contracts in future quarters, using quarterly data on number of contracts during the 3-year period from 1996 to 1998. The following is the resulting regression equation:
Y = 3.35 + .117Time - .083Q1 + 1.28Q2 + .617Q3
where Y is the number of contracts in a quarter; Time is a linear time trend measured in quarters from January 1996, Q1 is a dummy categorical variable equal to 1 in the first quarter and 0 otherwise (see pg. 206 for a discussion of categorical variables); Q2 is a dummy variable equal to 1 in the second quarter and 0 otherwise; and Q3 is a final dummy variable equal to 1 in the third quarter and 0 otherwise.
What is the forecast for the first quarter (Q1) for 1999?
a. 5.477
b. 6.477
c. 4.788