# Two More Quants Questions

Found these to be a little tricky. Thought that I would share them with everyone: #1. Troy Dillard, CFA, has estimated the following equation using semiannual data: xt = 44 + (0.1*xt1 )-(0.25*xt2 )- (0.15*xt3 )+ et. Given the data in the table below, what is Dillards best forecast of the second half of 2007? Time-------Value 2003: I 31 2003: II 31 2004: I 33 2004: II 33 2005: I 36 2005: II 35 2006: I 32 2006: II 33 A) 34.36. B) 34.05. C) 60.55. D) 35.00. #2. Troy Dillard, CFA, has estimated the following equation using quarterly data: xt = 93 - (0.5*xt1) + (0.1*xt4) + et. Given the data in the table below, what is Dillard’s best estimate of the first quarter of 2007? Time------Value 2005: I 62 2005: II 62 2005: III 66 2005: IV 66 2006: I 72 2006: II 70 2006: III 64 2006: IV 66 A) 66.60. B) 66.40. C) 67.20. D) 64.60.

first one: A. plug in formula -> 2007I estimate is 34.05 -> plug in formula -> 2007II estimate 34.355 second one: plug in formula -> C

1. A 2. B (I am assuming xt1 is x(t-1) etc)

xt1 = x(t-1) xt4 = x(t-4)

1. A 2. C (same assumptions as maratikus made)

Ah, I am stupid. For the second question I put in the answer C again and go 66.4. I hate roman numerals. I was thinking Q306 was 66. A C

Does et mean error term?

Black Swan Wrote: ------------------------------------------------------- > Does et mean error term? yes, probably et = e(t)

A C

finally at home and can work on a long plug and chug problem. and ofcourse i got the same answer as everyone else. a c

Good job everyone! Yes, the answers are A and C. Let me know if anybody needs any explanation.