Problem 2

The yield on a general obligation bond for the city of Davenport fluctuates with the market. The monthly quotations for 2019 are given in Table below.

a. Find the forecast value of the yield for the obligation bonds for each month, starting with May, using a four-month moving average.

b. Find the forecast value of the yield for the obligation bonds for each month, starting with July, using a six-month moving average.

c. Evaluate these forecasting methods using the MAD.

d. Evaluate these forecasting methods using the RMSE.

e. Evaluate these forecasting methods using the MAPE.

f. Forecast the yield for January 2020 using the better technique.

g. Use exponential smoothing with a smoothing constant of 0.2 and an initial forecast of 9.29 for January 2019 to forecast the yield for January 2020. Is this forecast better than the forecast made using the better moving average model? Explain.