What is the forecast for may using a four-month moving average?

OM 305

Dr. Robert Aboolian

Assignment # 2

Problem 1 (15 points) Apex Mutual Fund invests primarily in technology stocks. The price of the fund at the end of each month for the 12 months of 2019 is shown in Table below.

a. Find the forecast value of the mutual fund for each month by using a naïve model. The value for December 2018 was 19.00.

b. Evaluate this forecasting method using the MAD. c. Evaluate this forecasting method using the RMSE. d. Evaluate this forecasting method using the MAPE. e. Using a naive model, forecast the mutual fund price for January 2020. f. Use a three-month moving average to forecast the mutual fund price for

January 2020. Is this forecast better than the forecast made using naive model? Explain.

g. Use a four-month weighted moving average to forecast the mutual fund price for January 2020. Is this forecast better than the forecast made using three- month moving average? Explain.

Month Mutual

Fund Price January 19.39 February 18.96 March 18.20 April 17.89 May 18.43 June 19.98 July 19.51 August 20.63 September 19.78 October 21.25 November 21.18 December 22.14

Problem 2 (15 points) The yield on a general obligation bond for the city of Davenport fluctuates with the market. The monthly quotations for 2019 are given in Table below.

a. Find the forecast value of the yield for the obligation bonds for each month, starting with May, using a four-month moving average.

b. Find the forecast value of the yield for the obligation bonds for each month, starting with July, using a six-month moving average.

c. Evaluate these forecasting methods using the MAD. d. Evaluate these forecasting methods using the RMSE. e. Evaluate these forecasting methods using the MAPE. f. Forecast the yield for January 2020 using the better technique. g. Use exponential smoothing with a smoothing constant of 0.2 and an initial

forecast of 9.29 for January 2019 to forecast the yield for January 2020. Is this forecast better than the forecast made using the better moving average model? Explain.

Month

January

Yield

9.29

January 9.29 February 9.99 March 10.16 April 10.25 May 10.61 June 11.07 July 11.52 August 11.09 September 10.80 October November

10.50 10.86

December 9.97

Problem 3 (20 points) The Hughes Supply Company uses an inventory management method to determine the monthly demands for various products. The demand values for the last 12 months of each product have been recorded and are available for future forecasting. The demand values for the 12 months of 2019 for one electrical fixture are presented in Table below.

a. Use exponential smoothing with a smoothing constant of 0.5 and an initial value 205 to forecast the demand for January 2019.

b. Evaluate this forecasting methods using the MAPE. c. Find the best value for smoothing constant for the exponential smoothing and

the MAPE associated with it. d. Given the part c what is your forecast for January 2020.

Month

January

Demand

205 February 251 March 304 April 284 May 352 June 300 July 241 August 284 September 312 October 289 November 385 December 256

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