Question

5 below is a snapshot of jadas stock portfolio closing prices for 10 consecutive trading days. calculate the 5 - day simple moving average for day 6 and day 10, respectively. day closing price 1 $66 2 $63 3 $62 4 $59 5 $44 6 $48 7 $55 8 $47 9 $50 10 $58

Explanation:

Step1: Recall the formula for 5 - day simple moving average

The formula for a \(n\) - day simple moving average (SMA) is \(SMA=\frac{\sum_{i = t - n+1}^{t}P_i}{n}\), where \(P_i\) is the price on day \(i\) and \(n = 5\) for 5 - day SMA. For Day 6, we need the prices from Day 1 to Day 5. For Day 10, we need the prices from Day 6 to Day 10.

Step2: Calculate 5 - day SMA for Day 6

First, find the sum of closing prices from Day 1 to Day 5:
\(P_1 = 66\), \(P_2=63\), \(P_3 = 62\), \(P_4=59\), \(P_5 = 44\)
\(\sum_{i = 1}^{5}P_i=66 + 63+62 + 59+44\)
\(66+63 = 129\), \(129+62=191\), \(191 + 59=250\), \(250+44 = 294\)
Then, the 5 - day SMA for Day 6 is \(\frac{294}{5}=58.8\)

Step3: Calculate 5 - day SMA for Day 10

Find the sum of closing prices from Day 6 to Day 10:
\(P_6 = 48\), \(P_7=55\), \(P_8 = 47\), \(P_9=50\), \(P_{10}=58\)
\(\sum_{i = 6}^{10}P_i=48 + 55+47 + 50+58\)
\(48+55 = 103\), \(103+47=150\), \(150 + 50=200\), \(200+58 = 258\)
Then, the 5 - day SMA for Day 10 is \(\frac{258}{5}=51.6\)

Answer:

The 5 - day simple moving average for Day 6 is \(58.8\) and for Day 10 is \(51.6\)