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A New Car Dealer Has Been Using Exponential Smoothing with an Alpha

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Essay

A new car dealer has been using exponential smoothing with an alpha of .2 to forecast weekly new car sales. Given the data below, would a naive forecast have provided greater accuracy? Explain. Assume an initial exponential forecast of 60 units in period 2 .  Period  Demand 157262358460560656\begin{array} { l l } \text { Period } & \text { Demand } \\\hline 1 & 57 \\2 & 62 \\3 & 58 \\4 & 60 \\5 & 60 \\6 & 56\end{array}


Definitions:

Derivative Security

A financial security whose value is determined by or derived from an underlying asset or group of assets, such as stocks, bonds, commodities, or market indices.

Fixed Price

A contractually agreed-upon price for goods or services that is not subject to any changes in cost.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government securities.

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