Problem:
Mary Hernandez has invested in a stock mutual fund and she is considering liquidating and investing in a bond fund. She would like to forecast the price of the stock fund for the next month before making a decision. She has collected the following data on the average price of the fund during the past 20 months.
|
Month
|
Fund Price
|
Month
|
Fund Price
|
|
1
|
63 1/4
|
11
|
68 1/8
|
|
2
|
60 1/8
|
12
|
63 1/4
|
|
3
|
61 3/4
|
13
|
64 3/8
|
|
4
|
64 1/4
|
14
|
68 5/8
|
|
5
|
59 3/8
|
15
|
70 1/8
|
|
6
|
57 7/8
|
16
|
72 3/4
|
|
7
|
62 1/4
|
17
|
74 1/8
|
|
8
|
65 1/8
|
18
|
71 3/4
|
|
9
|
68 1/4
|
19
|
75 1/2
|
|
10
|
65 1/2
|
20
|
76 3/4
|
Required:
Question 1) Using a 3-month moving average, forecast the fund price for month 21.
Question 2) Using a 3-month weighted average with the most recent month weighted 0.60, the next most recent month weighted 0.30, and the third month weighted 0.10, forecast the fund price for month 21.
Question 3) Compute an exponentially smoothed forecast using a=0.40 and forecast the fund price for month 21.
Question 4) Compare the forecasts in (a), (b), and (c) using MAD and indicated the most accurate.
Solve the given numerical problem and illustrate step by step calculation.