A stock technical analyst uses smoothing methods to predict stock prices. The fo

Question

A stock technical analyst uses smoothing methods to predict stock prices. The following table contains the monthly price information for General Mills. Date Price 1/30/2015 55.33 2/27/2015 52.48 3/31/2015 53.79 4/30/2015 56.60 5/29/2015 55.34 6/30/2015 56.15 7/31/2015 55.72 8/31/2015 58.21 9/30/2015 56.76 10/30/2015 56.13 11/30/2015 58.11 12/31/2015 57.66 What is the predicted share price for September 30, 2015 if this technical analyst uses an exponential smoothing method with a smoothing constant of .7 and a 5-month moving average as the initial forecast share price for June 30, 2015?

A. $57.46

B. $57.30

C. $56.39

D. $56.97

Explanation / Answer

At Ft Date Price Forecast Hint 1/30/2015 55.33 2/27/2015 52.48 3/31/2015 53.79 4/30/2015 56.6 5/29/2015 55.34 6/30/2015 56.15         54.71 (55.33+52.48+53.79+56.6+55.34)/5 5 months moving average as initial forecast 7/31/2015 55.72         55.72 (56.15 x 0.7+ 54.71 x 0.3) (At x smoothing constant + Ft x (1-smoothing constant) 8/31/2015 58.21         55.72 (55.72 x 0.7 + 55.72 x 0.3) 9/30/2015 56.76         57.46 (58.21 x 0.7 + 55.72 x 0.3) Ans is A $57.46 10/30/2015 56.13 11/30/2015 58.11 12/31/2015 57.66

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