Lenovo uses the ZX-81 chip in some of its laptop computers. The prices of the ch

Question

Lenovo uses the ZX-81 chip in some of its laptop computers. The prices of the chip during the last 12 months were as follows: This exercise contains only . With alpha = 0.1 and the initial forecast for October of dollar 1.78, using exponential smoothing, the forecast for periods 11 and 12 is (round your responses to two decimal places): With alpha = 0.3 and the initial forecast for October of dollar 1.77, using exponential smoothing, the forecast for periods 11 and 12 is (round your responses to two decimal places):

Explanation / Answer

The formula for exponential smoothing forecast is

Ft+1 = (Alpha) Pt + (1-Alpha) Ft

Where Ft+1 is the price forecast for next period, Ft is the price forecast of the current period, Pt is the current period’s price and Alpha is the smoothing constant.

Forecast of November = 0.3*1.57 + 0.7*1.77 = 1.71

Forecast of December = 0.3*1.62 + 0.7*1.71 = 1.68

                    

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