A firm has developed forecasts for the yen for each of the four quarters of a ye

ID: 2793249 • Letter: A

Question

A firm has developed forecasts for the yen for each of the four quarters of a year.

Quarter Yen forecast Yen actual value Pound forecast Pound actual value

1 $.0050 $.0051 $1.50 $1.51

2 $.0048 $.0052 $1.53 $1.50

3 $.0053 $.0052 $1.55 $1.58

4 $.0055 $.0056 $1.49 $1.52

a- Calculate the mean absolute forecast errors in percentage terms over the four quarters for both the yen and the pound.

b. Which currency forecasts were more accurate?

For YEN

Mean absolute error = Sum of absolute error/n = .0001 + .0004+ .0001 + .0003 / 4 = 0.000225

or 0.0225 %

For Pound

Mean absolute error = Sum of absolute error/n = .01 + .03 + .03 + .03 / 4 = 0.025 or 2.5%

Lesser the mean absolute error value, more accurate the forecasts are, so Forecasts for Yen appear to be more accurate

Quarter Yen Actual Value Yen Forecast Absolute Error 1 .0051 .0050 0.0001 2 .0052 .0048 0.0004 3 .0052 .0053 0.0001 4 .0056 .0055 0.0003

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