MBA (2.

5) - 22B
Fall 2022
Semester 1

Business Mathematics and Statistics

QNT-123

Assignment
Topic: Estimation using Linear Equation

Prepared By: Lecturer:

Muhammad Farrukh Shan Sir Syed Khawaja Aman Ullah

Student ID: 964-2022
CREF Money Market Fund (March 31, 1988). The Initial value per share was set at $10.00.

a) Estimate the value per share on March 31, 1988. How much error is there in the estimate?
b) Determine the actual value of per share on June 30, 1991, and March 31, 1992, and compare
with the forecasts. How much error was there?
c) Test the accuracy of the estimating equation for the other quarters’ data point.

Solution:

a) ESTIMATING THE EQUATION AND DETERMINING THE ERROR

The initial value per share was $10.00 in March 31, 1988.

Finding the equation from the provided data:

Where; V = Value of a share

t = Time

and t1 = 6, V1 = 11.32

t2 = 9 V2 = 12.04

Formula: V – V1 = m (t - t1)

Where

Now putting the values as given in the data;

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The value of shares is increasing by 24% in every quarter.

Now putting the value of m in the formula;

V – V1 = m (t - t1)

V – 11.32 = 0.24(t-6)

V – 11.32 = 0.24t – 1.44

V = 0.24t – 1.44 + 11.32

To find out the value putting t = 0 in the equation.

Where t = 0 in March 31, 1988

V = 0.24(0) + 9.88

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The initial value per share was $10.00 and the estimated value is $9.88. Therefore, the estimated
value is $0.12 less than the actual value.

t Estimated
Actual Value Error
Quarter Month Year Value

0 3 1988 $9.88 $10.00 -$0.12

b) DETERMINING THE ACTUAL VALUES OF CREF MONEY MARKET PER SHARE

Source: Applied Mathematics for Business, Economics, and Social Sciences, Frank S. Budnick, via Internet

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 t
Actual Value
Quarter Month Year
0 3 1988 $10.00
1 6 1988 $10.16
2 9 1988 $10.36
3 12 1988 $10.57
4 3 1989 $10.81
5 6 1989 $11.07
6 9 1989 $11.32
7 12 1989 $11.56
8 3 1990 $11.79
9 6 1990 $12.04
10 9 1990 $12.28
11 12 1990 $12.52
12 3 1991 $12.74
13 6 1991 $12.93
14 9 1991 $13.12
15 12 1991 $13.30
16 3 1992 $13.43

Determining the actual value of per share on June 30, 1991 & March 31, 1992 from the
downloaded data is $12.93 & $13.43, respectively.

Estimating the value of June 30, 1991, where t = 13 (13th quarter), from the equation.

V = 0.24(13) + 9.88

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And putting t = 16 in the equation where t is 16th quarter.

V = 0.24(16) + 9.88

The actual value per share was $12.93 on June 30, 1988, while the estimated value is $13.
Therefore, the forecasted value is $0.07 more than actual value.

And the actual value per share was $13.43 on March 31, 1992 and infact the forecasted value
was $13.72. Hence, the estimated value is $0.29 more than the actual value.

t Estimated
Actual Value Error
Quarter Month Year Value

13 6 1991 $13.00 $12.93 $0.07

16 6 1992 $13.72 $13.43 $0.29

c) TEST OF ACCURACY

When we already have got the values of 0th, 13th & 16th quarters now estimating the rest of other
values of remaining quarters with the help of the equation.

Putting t = 1, putting t = 2

V = 0.24(1) + 9.88 V = 0.24(2) + 9.88

V = 0.24 + 9.88 V = 0.48 + 9.88

V = 10.12 V = 10.36

Putting t = 3 putting t = 4

V = 0.24(3) + 9.88 V = 0.24(4) + 9.88

V = 0.72 + 9.88 V = 0.96 + 9.88

V = 10.60 V = 10.84

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Putting t = 5 putting t = 6

V = 0.24(5) + 9.88 V = 0.24(6) + 9.88

V = 1.2 + 9.88 V = 1.44 + 9.88

V = 11.08 V = 11.32

Putting t = 7 putting t = 8

V = 0.24(7) + 9.88 V = 0.24(8) + 9.88

V = 1.68 + 9.88 V = 1.92 + 9.88

V = 11.56 V = 11.80

Putting t = 9 putting t = 10

V = 0.24(9) + 9.88 V = 0.24(10) + 9.88

V = 2.16 + 9.88 V = 2.4 + 9.88

V = 12.04 V = 12.28

Putting t = 11 putting t = 12

V = 0.24(11) + 9.88 V = 0.24(12) + 9.88

V = 2.64 + 9.88 V = 2.88 + 9.88

V = 12.52 V = 12.76

Putting t = 14 putting t = 15

V = 0.24(14) + 9.88 V = 0.24(15) + 9.88

V = 3.36 + 9.88 V = 3.6 + 9.88

V = 13.24 V = 13.48

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 Test of Accuracy Table
t Estimated Actual
Error
Quarter Month Year Value Value
0 3 1988 $9.88 $10.00 -$0.12
1 6 1988 $10.12 $10.16 -$0.04
2 9 1988 $10.36 $10.36 $0.00
3 12 1988 $10.60 $10.57 $0.03
4 3 1989 $10.84 $10.81 $0.03
5 6 1989 $11.08 $11.07 $0.01
6 9 1989 $11.32 $11.32 $0.00
7 12 1989 $11.56 $11.56 $0.00
8 3 1990 $11.80 $11.79 $0.01
9 6 1990 $12.04 $12.04 $0.00
10 9 1990 $12.28 $12.28 $0.00
11 12 1990 $12.52 $12.52 $0.00
12 3 1991 $12.76 $12.74 $0.02
13 6 1991 $13.00 $12.93 $0.07
14 9 1991 $13.24 $13.12 $0.12
15 12 1991 $13.48 $13.30 $0.18
16 3 1992 $13.72 $13.43 $0.29

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