Question: Question (30 marks): The mutual fund prices at the end of each month for the 12 months of 2018 are given in Table 1-1. Table

Question (30 marks):

The mutual fund prices at the end of each month for the 12 months of 2018 are given in Table 1-1.

Table 1-1:

Mutual fund price for 2018 Month Price

January 100

February 105

March 108

April 109

May 110

June 112

July 113

August 111

September109

October 112

November 113

December 112

(a) Construct a five-month moving average model to forecast the mutual fund price for Jan 2019.

(b) Apply the simple exponential smoothing method with a smoothing constant of 0.4 to make forecast. If the first observation is taken as the initial value, what is the predicted mutual fund price for March 2018? What is the forecast error for March 2018?

(c) Compare the two (2) different smoothing methods used in 1(a) and 1(b) in terms of their sensitivities to changes in data. (hint: calculation is not required)

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