(See page 50 of the Cryer and Chan text, Exercise 3.2)

LIAPP,

I used the following 'givens' and I made a table like the one below to help me through the calculations.  Hope it helps.

Givens: N=50; Var(e)=1; Var(Y_t) = Var(mu)+Var(A)+Var(B); rho_1=Cov(Y_t,Y_t-1)/Var(Y_t);  that last 'given' is explained in this forum and in the book (I think)

Table:

#     Var            Cov(Y_t,Y_t-1)            rho_1            Formula from bottom of page 28

1    0+1+1=2;      Var(e)=1;                   1 / 2 = .5;      2/50 * [1 + 2*(50-1)/50*(.5)]=0.0792

2    0+1+1/4=1.25; .5*Var(e)=.5 ;            .5/1.25=.4 ;   1.25/50[1+1.96*(.4)=0.0446

and so on and so forth.  I'd write it al lout, but I don't have the time.