(Situation K) Foreign Exchange Rates, the Values of Foreign Currency

Essay

(Situation K) Foreign Exchange rates, the values of foreign currency in U.S. dollars, are important to investors and international travelers. The table lists the monthly foreign exchange rates of the British pound (in U.S. dollars per pound) for a certain year.
$$\begin{array} { l l } \underline {\text { Month }} & \underline { \text { Exchange Rate } } \\\text { January } & 1.13 \\\text { February } & 1.10 \\\text { March } & 1.13 \\\text { April } & 1.23 \\\text { May } & 1.25 \\\text { June } & 1.28 \\\text { July } & 1.38 \\\text { August } & 1.39 \\\text { September } & 1.36 \\\text { October } & 1.42 \\\text { November } & 1.44 \\\text { December } & 1.44\end{array}$$
-Consider the table below which displays the price of a commodity for six consecutive
years.

$\begin{array}{c|c}\hline \text { Year } & \text { Price } \\\hline 1 & 250 \\\hline 2 & 255 \\\hline 3 & 253 \\\hline 4 & 255 \\\hline 5 & 259 \\\hline 6 & 261 \\\hline\end{array}$

a. $\text { Use the method of least squares to fit the model } E\left(Y_{t}\right)=\beta_{0}+\beta_{1} t \text { to the data. Write the }$ prediction equation.

b. Calculate the residuals and construct a residual plot.
c. Calculate the Durbin Watson d statistic.