Question

To avoid a monthly service fee in an interest-bearing checking account, customers must maintain a minimum average daily balance. Bankrate's 2008 survey of 249 banks and thrifts in the top 25 metropolitan areas showed that you need to maintain an average balance of $3,462 to avoid a monthly service fee. With an average fee of $11.97 and an average interest rate of only 0.24 percent, customers with interest-bearing checking accounts are not getting much value for basically providing the bank with a line of credit equal to the average monthly balance required to avoid the monthly service fee (Bankrate website, October 27, 2008). The following table shows the minimum average balance required to avoid paying a monthly service fee from 2001-2008.
Year Balance ($)
2001 ........... 2435
2002 ........... 2593
2003 ........... 2258
2004 ........... 2087
2005 ........... 2294
2006 ........... 2660
2007 ........... 3317
2008 ........... 3462
a. Construct a time series plot. What type of pattern exists in the data?
b. Using Minitab or Excel, develop a linear trend equation for the time series. Compute an estimate of the average balance required to avoid a monthly service fee for 2009.
c. Using Minitab or Excel, develop a quadratic trend equation for the time series. Compute an estimate of the average balance required to avoid a monthly service fee for 2009.
d. Using MSE, which approach provides the most accurate forecasts for the historical data?
e. For these data would you recommend that the forecast for 2009 be developed using the linear trend equation or the quadratic trend equation? Explain.


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  • CreatedSeptember 20, 2015
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