Question: The yield on a general obligation bond for the city of Davenport fluctuates withthe market.The monthly quotations for 2006 are given in Table shown below:
Month Actual Value Y bar
January 9.29
February 9.99
March 10.16
April 10.25
May 10.61
June 11.07
July 11.52
August 11.09
September 10.8
October 10.5
November 10.86
December 9.97
Use exponential smoothing with a smoothing constant of .2 and an initial value of 9.29 to forecast the yield for January 2007.
Is this forecast better than the forecast made using the better moving average model? Why? Explain your answer, support with numbers.