Question

simple moving average
kenee made a spreadsheet to calculate the 5 - day sma for the stocks in her portfolio
part a
what formula should kenee put into cell c7?
part b
calculate the 5 - day sma for eight consecutive day closing prices in the spreadsheet.
part c
do you notice any trend in the 5 - day sma for the closing prices? describe any trends in the data that you noticed.

Explanation:

Step1: Recall SMA formula

The formula for a 5 - day Simple Moving Average (SMA) is $\frac{\sum_{i = n - 4}^{n}P_{i}}{5}$, where $P_{i}$ is the price on day $i$. In spreadsheet terms, for cell C7 which is calculating the 5 - day SMA starting from row 3 to row 7, the formula should sum the closing prices from B3 to B7 and divide by 5.
The formula for cell C7 in a spreadsheet (using common spreadsheet syntax like in Excel or Google Sheets) is $=\frac{B3 + B4 + B5 + B6 + B7}{5}$ or $=AVERAGE(B3:B7)$.

Step2: Calculate SMA values

For the 5 - day SMA:

• For the first possible 5 - day period (starting from day 1), we can't calculate it until we have 5 data points.
• For the period from day 3 to day 7:

Let $P_3 = 28.06$, $P_4=31.18$, $P_5 = 32.44$, $P_6=31.88$, $P_7 = 31.78$.
$SMA=\frac{28.06+31.18 + 32.44+31.88+31.78}{5}=\frac{155.34}{5}=31.068$

• We would continue this process for other applicable 5 - day periods in the data set.

Step3: Analyze trends

To determine trends in the 5 - day SMA values:

• If the 5 - day SMA values are increasing over time, it indicates an upward - trending price movement on average over the 5 - day periods.
• If the 5 - day SMA values are decreasing over time, it indicates a downward - trending price movement on average over the 5 - day periods.
• If the 5 - day SMA values are relatively stable (fluctuating around a certain value), it indicates a relatively flat price movement on average over the 5 - day periods. We would need to calculate all the applicable 5 - day SMA values and then visually or numerically analyze how they change from one period to the next.

Answer:

Part A: In a spreadsheet, the formula for cell C7 can be $=AVERAGE(B3:B7)$ or $=\frac{B3 + B4 + B5 + B6 + B7}{5}$.
Part B: For the 5 - day period from day 3 to day 7, the 5 - day SMA is 31.068. Calculate other 5 - day SMA values in a similar fashion for other applicable periods.
Part C: Analyze if the 5 - day SMA values are increasing, decreasing, or stable to determine upward, downward, or flat trends respectively in the closing - price data over 5 - day periods.