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? yt = -0.1 + 0.75yt-1 - 0.125yt-2 + ut A) -0.1 B) 0.27 C) -0.34 D) 0.30

Multiple Choice