Increasing the Number of Periods in a Moving Average Will

question 136

Multiple Choice

Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of

• A) manager understanding.
• B) accuracy.
• C) stability.
• D) responsiveness to changes.
• E) reliability.

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Definitions:

Nominal Rate

The advertised or stated interest rate on a loan or investment, not accounting for compounding or inflation effects.

Compounded Quarterly

The method of applying interest to the principal amount on a quarterly basis, considering the accumulated interest from previous quarters.

Interest

The charge for borrowing money or the amount earned on deposited funds, typically expressed as a percentage of the principal amount.

Compounded Semiannually

Interest calculation method where the interest rate is applied twice a year, resulting in interest on interest being added to the principal.