Question: A major brokerage company has an office in Miami, Florida. The manager of the office is evaluated based on the number of new clients generated each quarter. The following data reflect the number of new customers

added during each quarter between 1998 and 2001.

1998 1999

1st quarter 218 1st quarter 250

2nd quarter 190 2nd quarter 220

3rd quarter 236 3rd quarter 265

4th quarter 218 4th quarter 241

2000 2001

1st quarter 244 1st quarter 229

2nd quarter 228 2nd quarter 221

3rd quarter 263 3rd quarter 248

4th quarter 240 4th quarter 231

a. Plot the time series and discuss components that are present in the data.

b. Referring to part a, fit the linear trend model to the data for 1998 through 2000. Then use the resulting

model to forecast the number of new brokerage customers for each quarter in 2001. Compute the MAD

and MSE for these forecasts and discuss the results.

c. Using the data for 1998 through 2000, determine the seasonal indexes for each quarter.

d. Develop a seasonally unadjusted forecast for the four quarters of 2001.

e. Using the seasonal indexes computed in part d, determine the seasonally adjusted forecast for each

quarter of 2001. Compute the MAD and MSE for these forecasts.

f. Examine the values for the MAD and MSE in parts b and e. Which of the two forecasting techniques

would you recommend the manager use to forecast the number of new clients generated each quarter?

Support your choice by giving your rationale.