solution

Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the chip during the past 12 months were as follows:

a) Use a 2-month moving average on all the data and plot the averages and the prices.

b) Use a 3-month moving average and add the 3-month plot to the graph created in part (a).

c) Which is better (using the mean absolute deviation): the2-month average or the 3-month average?

d) Compute the forecasts for each month using exponential smoothing, with an initial forecast for January of $1.80. Use  = .1, then  = .3, and finally  = .5. Using MAD, which a is the best?