Question

Daily Spot Exchange Rate, U.S. Dollars per Pound Sterling
Date		Rate				Date		Rate				Date		Rate
1-Apr-04			1.8684			13-Apr-04			1.8260			23-Apr-04			1.7674
2-Apr-04			1.8373			14-Apr-04			1.7702			26-Apr-04			1.7857
5-Apr-04			1.8140			15-Apr-04			1.7785			27-Apr-04			1.7925
6-Apr-04			1.8674			16-Apr-04			1.8104			28-Apr-04			1.7720
7-Apr-04			1.8410			19-Apr-04			1.8155			29-Apr-04			1.7856
8-Apr-04			1.8525			20-Apr-04			1.7816			30-Apr-04			1.7844
9-Apr-04			1.8322			21-Apr-04			1.7620			3-May-04			1.7720
12-Apr-04			1.8558			22-Apr-04			1.7684			4-May-04			1.7507
5-May-04			1.7732			13-May-04			1.7554			21-May-04			1.7880
6-May-04			1.7641			14-May-04			1.7692			24-May-04			1.7808
7-May-04			1.7942			17-May-04			1.7595			25-May-04			1.8535
10-May-04			1.7623			18-May-04			1.7795			26-May-04			1.8342
11-May-04			1.7644			19-May-04			1.7727			27-May-04			1.8869
12-May-04			1.7743			20-May-04			1.7610			28-May-04			1.8730

Click here for the Excel Data File

(a) Make a line chart and fit an m-period moving average to the exchange rate data shown above with m = 2, 3, 4, and 5 periods. For each method, state the last MA value. (Round your answers to 4 decimal places.)

m-period	Next period forecast
2		Not attempted
3		Not attempted
4		Not attempted
5		Not attempted

(b) Which value of m do you prefer?
  
The preferred m value is 5  Correct. This value of m Using this allows one to forecast the weekly or monthly trends without  Correctoverreacting to daily fluctuations.

(c) Is a moving average appropriate for this kind of data?
  
Yes  Correct, a moving average is appropriate  Correct.

Next

Answer 1

(a) For, m = 2 the moving average is calculated as the average of the last two observations.
Thus, the last ma for m=2 is 1.88

For m = 3 , the last ma is 1.8647

For m = 4, the last ma is 1.8619

For m = 5, the last ma is 1.8619

Refer to the chart in the attached picture to see the Moving Average line.