PLEASE ANSWER THE QUESTION 2 ONLY

A State University Credit Union handles saving accounts and makes loans to members. In order to plan its investment strategies, the credit union needs to forecast monthly loans requests. Monthly Loan requests in millions of dollars were recorded for the last two years and are presented in the data set at the last page. Answer the following questions:

Problem 1. Two models are suggested: (i) Exponential smoothing with alpha = 0.2 or (ii) Exponential smoothing with alpha = 0.6. Use the template and the MAPE criterion (you do not need to calculate anything by hand). Which model works better and why? Select the correct answer below (read the entire answer): a. Expon. Smooth. with alpha = 0.2, because its MAPE is larger than its MSE, indicating a better performance. b. Expon. Smooth. with alpha = 0.6 because the weight we give to the recent data is larger than this weight in the other model, indicating a better performance. c. Expon. Smooth. with alpha = 0.2, because its MAPE= 8.6, while MAPE of the other model is = 8.86, indicating a better performance. d. Expon. Smooth with alpha = 0.2, for a reason not mentioned above.

2. Here you need to show your familiarity with the exponential smoothing forecast calculations, and the calculation of MAE. The first four data points were separated from the rest of the time series. Pretend this is now the only sample you have available (Y1 = 1.34, Y2 = 1.5, Y3 = 1.48, Y4 = 1.78). (i) Show process of calculating F3+1, F4+1, and F4+3 for the reduced time series of Y1, Y2, Y3, and Y4, using the Expon. Smooth. with alpha = 0.6 (ii) Show how you would calculate MAE for the reduced sample shown above when using the forecasts you calculated in part (i).

Time series for question 1 1.34 1.5 1.48 1.78 1.59 1.5 1.42 1.85 1.77 1.52 1.42 1.41 1.58 1.31 1.55 1.39 1.45 1.74 1.68 1.38 1.45 1.43 1.43 1.48

I WANT THE ANSWER FOR QUESTION 2 ONLY