Investments
Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 12, Problem 18PS
Summary Introduction

To identify:

The signals for any buy or sell by using table9.3and computing five days moving average for computer Inc.

Introduction:

Industry Analysis: It is a most important puppet which was used to compare a specified company's performance with the other's market in the same industry market.

Expert Solution & Answer
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Explanation of Solution

Given:

Table9.3

Investments, Chapter 12, Problem 18PS

Detailed explanation / work out of the complete problem.

    Days Moving average formula Moving average Action

      1 to 5

      19.63+20+20.50+22+21.135

      20.62

      2 to 6

      20+20.50+22+21.13+225

      21.13

      3 to 7

      20.50+22+21.13+22+21.885=107.515

      21.50

      4 to 8

      22+21.13+22+21.88+22.55=109.515

      21.90

      5 to 9

      21.13+22+21.88+22.5+23.135=110.645

      22.13

      6 to 10

      22+21.88+22.5+23.13+23.885=113.395

      22.68

      7 to 11

      21.88+22.5+23.13+23.88+24.505=115.895

      23.18

      8 to 12

      22.5+23.13+23.88+24.50+23.255=117.265

      23.45
    Selling point

      9 to 13

      23.13+23.88+24.50+23.25+22.135=116.895

      23.38

      10 to 14

      23.88+24.50+23.25+22.13+225=115.765

      23.15

      11 to 15

      24.50+23.25+22.13+22+20.635=112.515

      22.50

      12 to 16

      23.25+22.13+22+20.63+20.255=108.265

      21.65

      13 to 17

      22.13+22+20.63+20.25+19.755=104.765

      20.95

      14 to 18

      22+20.63+20.25+19.75+18.755=101.355

      20.28

      15 to 19

      20.63+20.25+19.75+18.75+17.505=96.885

      19.38

      16 to 20

      20.25+19.75+18.75+17.50+195=95.255

      19.05

      17 to 21

      19.75+18.75+17.50+19+19.635=94.635

      18.93
    Buying point

      18 to 22

      18.75+17.50+19+19.63+21.505=96.385

      19.28

We see that in9 to 13, the trading price of13inday is lower than a8thday so our selling point is when the price is high i.e. on12thday which is$23.45.

And further, we see that22ndday value is high from17thday's value so on1721stday's average is the best point for buying the stock of computer Inc.

Conclusion

From the above, the selling point is12thday and buying point is the21thday of Computer Inc.

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