ECON2209/5248 Notes & Tutorial Exercises, School of Economics, UNSW

Tutorial 1 (Week 2 6-8 March 2012)

Homework before Week 2
Read Chapters 1 and 3. Check Concepts for Review at the end of each
chapter. Make sure that you understand these concepts.
Test yourself with the following questions.
What is the essence of forecasting?
What makes business forecasting a challenge?
What is a forecasting model?
What are the main components of business forecasting?
Why simpler models are preferred?
Do the above before you try the Problem Set below.
Problem Set for Week 2 Tutorial (Ch1, Ch3)
1. Question 1 on Page 9. Detail one (rather than three) forecast.
2. Question 2 (a)-(b) on Page 9.
3. Question 2 (c)-(d) on Page 9-10.
4. Question 3 on Page 10.
5. Question 4 on Page 10.
6. Question 6 on Page 10.
7. Question 2 on Page 47.
8. Question 6 (c) on Page 48.
9. You are an Investment Advisor and have been asked by your Manager to
assess the potential gains for clients from investing in an Initial Public
Offering (IPO) of shares in a Biotechnology company. Net profits after tax
(NPAT) for the company were losses of 1 million dollars for 2007 and 2008,
and positive profits of 1 million 2009, 2 million in 2010 and 4 million in 2011.
Use the method of least squares to calculate the average annual increase in

ECON2209/5248 Notes & Tutorial Exercises, School of Economics, UNSW

profits over this period. You extrapolate these results into the future since
higher profit should lead to higher share price. What assumptions have you
made? List a few reasons why your forecasts may be unreliable.
Try the above before you go to the tutorial class.