Moving to another question will save this response Assignments Question 11 Tools

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Moving to another question will save this response Assignments Question 11 Tools Suppose a savings and loan association forecasts the delinquency rate on home mortgages and discovers that the de rapidly becoming a serious problem. A management consultant suggests that the trend analysis may be overstating the upward trend because it fails to account for the fact that borrowers consistently fall behind in their mortgage payments in December and consultant suggests estimating this model: My Grades General Resources Bb Help Help Desk where DRt- the percentage of mortgage payments delinquent in time period t, andt 1,. ,48 (January 2010 through December 2013) and where D is equal to one for the months of December and January and zero otherwise. The estimation results are DEPENDENT VARIABLE: DRT OBSERVATIONS F-RATIO 1794.0 P-VALUE ON F 00001 0.9876 PARAMETER ESTIMATE 2200 0018 0810 48 ERROR 0.780 T-RATIO 2.82 4.50 3.86 P-VALUE 0.0071 0.0001 0.0004 INTERCEPT My Groups Group 14 Predict the delinquency rate for January 2014 DRJan 2014 d) Moving to another question will save this response Question 11 of 15

Explanation / Answer

DR_jan14 = 2.2 + 0.018 * T + 0.81* D   {look at parameter estimate column}
here T = 49
D = 1 here as it is in january
hence
DR_jan14 = 2.2 + 0.018 *49 + 0.81* 1
= 3.892

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