Q 14# Consider the following AR(2) model. What is the optimal 2-step ahead forecast for y if all information available is up to and including time t, if the values of y at time t, t-1 and t-2 are -0.3, 0.4 and -0.1 respectively, and the value of u at time t-1 is 0.3? y

# Consider the following AR(2) model. What is the optimal 2-step ahead forecast for y if all information available is up to and including time t, if the values of y at time t, t-1 and t-2 are -0.3, 0.4 and -0.1 respectively, and the value of u at time t-1 is 0.3? y_{t} = -0.1 + 0.75y_{t-1} - 0.125y_{t-2} + u_{t}
A) -0.1
B) 0.27
C) -0.34
D) 0.30

Multiple Choice