Question: (c) Derive the forecasting formula for AR(1) model (5 marks) (d) Consider the AR(1) process given by (Z, - () = $1 (Z,-1 -#) +

(c) Derive the forecasting formula for AR(1) model (5 marks) (d) Consider the AR(1) process given by (Z, - "() = $1 (Z,-1 -#) + a, (a, - N(0, 2)) Suppose in an experiment conducted, # = 100 observations from the model gave the following estimates 100 Z, = 1312, a = 87, and p = 03 (1) Derive equations of the estimates for , and a- in terms of the y,, p, and , (6 marks) (i1) Use the results to find the method of moments estimates for u, ,, and a? (6 marks)

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