Prices of crude oil have been steadily rising over the last two years (The Wall Street Journal, December 14, 2010). The monthly data on price per gallon of unleaded regular gasoline in the United States from January 2009 to December 2010 were available. Three trend models were created starting with t = 1 and the following output was generated.
Variable Linear Trend Quadratic Trend Cubic Trend
Intercept 2.0717 1.7700 1.5175
t 0.0391 0.1087 0.2188
t² N/A −0.0028 −0.0136
t³ N/A N/A 0.0003
Adjusted R2 0.7240 0.8668 0.9238
Which of the following is the cubic trend equation used to forecast the price of regular unleaded gasoline?
a = 1.5175 + 0.2188t³.
b. (yt =1.5175 + 0.2188t − 0.0136t² + 0.0003t³)
c. = 1.5175 − 0.0136t² + 0.0003t³
d. = 1.5175 + 0.2188t − 0.0136t² + 0.0003t³
