1. Comparing Currency Forecasts. Grotex is a small engineering firm exporting to European markets. Over the last four quarters, Grotex has obtained forecasts for the value of the EUR (in USD) from two different sources. A financial analyst in the firm is assigned the task of selecting one of these two sources for future business. Given the data below, what are the various conclusions that can be derived? Data Year-4 Year -3 Year-2 Year -1 1.10 1.15 1.20 1.15 1.25 1.15 0.90 0.95 0.95 Forecast I 1.05 Forecast II 1.05 Actual 1.10 a) Calculate the absolute forecast errors and mean absolute forecast error for Forecast I and Forecast II. Which one is superior? b) Calculate the squared errors and root mean squared error for Forecast I and Forecast II. Which one is s d) Calculate the success and failures in predicting the direction of change and the success ratio for Forecast I and Forecast II. Which one is superior? d) Calculate the percentage absolute errors and mean percentage absolute forecast error for Forecast I and Forecast II. Which one is superior? Solution: omparing Currency (9) (10) Forecast Actual Forecast I AFE AFE 2 Success II AFE AFE 2 Success 1.15 1.25 1.05 0.95 1.2 -4 3 1.15 -2 1.15 1.05 0.9 0.95 MAFE RMSE SUCCESS RATIO