Question

What is the Regression Equation (i.e., what are the values of a and b)? What is the forecast value for November? What is the Standard Error of the Estimate?

 

 

Answer 1

While the formula for calculating a and b are provided, we will calculate them straightway by using standard formula in excel.

For that, we place given values of t and y in 2 different columns in excel and apply the formula LINEST ( ) to obtain values of a and b . Accordingly , relevant values are :

A = 260

B= 40

Therefore , y = 260 + 40.t

REGRESSION EQUATION : Y = 260 + 40.t

To determine value for November , we put value of t = 11 . Accordingly relevant value of Y as follows :

Y = 260 + 40 x 11 = 260 + 440 = 700

FORECAST VALUE FOR NOVEMBER = 700

Standard error of the estimate = Square root ( sum of all ( Forecast value of y – Actual value of y)^2/ number of observations)

Number of observations = Number of periods = 5

Following table presents the calculations accordingly :

Period	Y - actual	Y - Forecast	(Y-forecast – Y-actual)^2
January	300	300	0
February	400	340	3600
March	200	380	32400
April	600	420	32400
May	400	460	3600
		Sum =	72000

Therefore , standard error of the estimate = square root ( 72000/5) = Square root ( 14400) = 120

STANDARD ERROR OF THE ESTIMATE = 120