Concept explainers
(a)
To determine:
To set the spreadsheet and to calculate the 26 week moving average of the index
Introduction:
For a stock price, the moving average is the average stock price over a certain given time interval. This interval however gets updated with time. In case of a 50 day moving average, the average price is tracked over the prior 50 days.
Answer to Problem 25PS
The 26 week moving average of the index is calculated and is presented in the explanation.
Explanation of Solution
Given Information:
Value of the index in the same period beginning should be kept as 100 and For each week it is updated by multiplying the level of previous week by (1+
The data was downloaded from the given website.
The weekly returns are converted to weekly index values. Here 100 is used as the base for the week before the first week of the set of data. From this, the 26 week moving average of S&P 500 is calculated.
| Week | S&P rate |
| 2013.01 | 1.64 |
| 2013.02 | 0.17 |
| 2013.03 | -0.82 |
| 2013.04 | 0.85 |
| 2013.05 | 0.59 |
| 2013.06 | -0.21 |
| 2013.07 | 0.12 |
| 2013.08 | 1.19 |
| 2013.09 | -3.27 |
| 2013.1 | -1.00 |
| 2013.11 | -0.03 |
| 2013.12 | 3.25 |
| 2013.13 | -0.23 |
| 2013.14 | -0.47 |
| 2013.15 | 0.47 |
| 2013.16 | -2.97 |
| 2013.17 | -0.91 |
| 2013.18 | 0.07 |
| 2013.19 | -0.20 |
| 2013.2 | 2.77 |
| 2013.21 | 0.11 |
| 2013.22 | 1.21 |
| 2013.23 | -0.27 |
| 2013.24 | 0.19 |
| 2013.25 | -0.85 |
| 2013.26 | -1.02 |
| 2013.27 | -0.92 |
| 2013.28 | -1.57 |
| 2013.29 | 1.72 |
| 2013.3 | -3.60 |
| 2013.31 | 0.32 |
| 2013.32 | 3.07 |
| 2013.33 | 0.88 |
| 2013.34 | 0.59 |
| 2013.35 | 0.85 |
| 2013.36 | 0.50 |
| 2013.37 | -1.49 |
| 2013.38 | 1.96 |
| 2013.39 | -1.00 |
| 2013.4 | -1.11 |
| 2013.41 | -1.13 |
| 2013.42 | 2.91 |
| 2013.43 | 3.61 |
| 2013.44 | 1.29 |
| 2013.45 | -0.86 |
| 2013.46 | 0.79 |
| 2013.47 | 0.76 |
| 2013.48 | 0.06 |
| 2013.49 | 0.57 |
| 2013.5 | 1.11 |
| 2013.51 | 0.08 |
| 2013.52 | -2.01 |
| 2014.01 | -0.17 |
| 2014.02 | -1.24 |
| 2014.03 | 0.56 |
| 2014.04 | 2.38 |
| 2014.05 | 0.45 |
| 2014.06 | -0.32 |
| 2014.07 | 0.87 |
| 2014.08 | 1.07 |
| 2014.09 | -1.91 |
| 2014.1 | -1.15 |
| 2014.11 | -1.18 |
| 2014.12 | 0.25 |
| 2014.13 | 0.48 |
| 2014.14 | -3.26 |
| 2014.15 | 1.24 |
| 2014.16 | 0.16 |
| 2014.17 | 1.15 |
| 2014.18 | -1.17 |
| 2014.19 | 2.93 |
| 2014.2 | 0.96 |
| 2014.21 | -0.09 |
| 2014.22 | 0.05 |
| 2014.23 | 1.37 |
| 2014.24 | -1.96 |
| 2014.25 | 0.46 |
| 2014.26 | 1.49 |
| 2014.27 | 1.26 |
| 2014.28 | 0.57 |
| 2014.29 | 0.16 |
| 2014.3 | -0.69 |
| 2014.31 | 0.14 |
| 2014.32 | -0.47 |
| 2014.33 | -1.39 |
| 2014.34 | 1.24 |
| 2014.35 | 1.91 |
| 2014.36 | -0.46 |
| 2014.37 | -1.67 |
| 2014.38 | 1.32 |
| 2014.39 | -2.79 |
| 2014.4 | -0.78 |
| 2014.41 | -0.45 |
| 2014.42 | 1.41 |
| 2014.43 | 1.93 |
| 2014.44 | 1.35 |
| 2014.45 | 1.10 |
| 2014.46 | 1.60 |
| 2014.47 | -0.22 |
| 2014.48 | -0.41 |
| 2014.49 | 0.55 |
| 2014.5 | 0.31 |
| 2014.51 | -1.77 |
| 2014.52 | 3.15 |
| 2015.01 | 0.19 |
| 2015.02 | -2.10 |
| 2015.03 | 2.04 |
| 2015.04 | -1.76 |
| 2015.05 | 0.29 |
| 2015.06 | 1.72 |
| 2015.07 | 0.47 |
| 2015.08 | -0.50 |
| 2015.09 | -0.13 |
| 2015.1 | 1.99 |
| 2015.11 | -0.32 |
| 2015.12 | -0.29 |
| 2015.13 | -0.23 |
| 2015.14 | -0.64 |
| 2015.15 | 1.90 |
| 2015.16 | 0.24 |
| 2015.17 | 0.80 |
| 2015.18 | -2.48 |
| 2015.19 | -1.66 |
| 2015.2 | 1.01 |
| 2015.21 | 0.48 |
| 2015.22 | -2.83 |
| 2015.23 | -0.12 |
| 2015.24 | -0.17 |
| 2015.25 | 2.29 |
| 2015.26 | -0.53 |
| 2015.27 | -2.44 |
| 2015.28 | 0.34 |
| 2015.29 | 3.25 |
| 2015.3 | 0.17 |
| 2015.31 | -0.93 |
| 2015.32 | 2.89 |
| 2015.33 | -0.67 |
| 2015.34 | 1.23 |
| 2015.35 | -0.86 |
| 2015.36 | 1.73 |
| 2015.37 | -0.38 |
| 2015.38 | 1.61 |
| 2015.39 | 1.08 |
| 2015.4 | 1.20 |
| 2015.41 | 0.15 |
| 2015.42 | 0.78 |
| 2015.43 | -1.00 |
| 2015.44 | 1.25 |
| 2015.45 | 1.58 |
| 2015.46 | -0.05 |
| 2015.47 | -0.09 |
| 2015.48 | 0.85 |
| 2015.49 | 0.65 |
| 2015.5 | -1.11 |
| 2015.51 | 0.62 |
| 2015.52 | -0.76 |
| 2016.01 | 1.92 |
| 2016.02 | -0.29 |
| 2016.03 | -0.48 |
| 2016.04 | 1.88 |
| 2016.05 | -0.60 |
| 2016.06 | 1.24 |
| 2016.07 | -0.29 |
| 2016.08 | -4.57 |
| 2016.09 | 1.52 |
| 2016.1 | -1.21 |
| 2016.11 | 3.51 |
| 2016.12 | -0.97 |
| 2016.13 | 1.58 |
| 2016.14 | 0.74 |
| 2016.15 | 2.27 |
| 2016.16 | 0.61 |
| 2016.17 | 0.93 |
| 2016.18 | -0.03 |
| 2016.19 | 1.16 |
| 2016.2 | -0.61 |
| 2016.21 | 1.57 |
| 2016.22 | -1.97 |
| 2016.23 | 1.78 |
| 2016.24 | -1.64 |
| 2016.25 | -0.08 |
| 2016.26 | 1.70 |
| 2016.27 | 1.22 |
| 2016.28 | -0.87 |
| 2016.29 | -5.46 |
| 2016.3 | -0.90 |
| 2016.31 | 0.63 |
| 2016.32 | 0.00 |
| 2016.33 | 2.51 |
| 2016.34 | -0.50 |
| 2016.35 | -1.03 |
| 2016.36 | 1.94 |
| 2016.37 | 2.55 |
| 2016.38 | 0.40 |
| 2016.39 | 2.14 |
| 2016.4 | 0.31 |
| 2016.41 | -4.26 |
| 2016.42 | 2.63 |
| 2016.43 | -1.57 |
| 2016.44 | -4.01 |
| 2016.45 | 0.45 |
| 2016.46 | -1.14 |
| 2016.47 | 3.15 |
| 2016.48 | 1.52 |
| 2016.49 | -2.48 |
| 2016.5 | 1.18 |
| 2016.51 | -0.56 |
| 2016.52 | -4.06 |
| 2017.01 | -0.82 |
| 2017.02 | -5.77 |
| 2017.03 | 0.75 |
| 2017.04 | 4.91 |
| 2017.05 | -4.67 |
| 2017.06 | 1.56 |
| 2017.07 | 0.35 |
| 2017.08 | -1.32 |
| 2017.09 | -3.08 |
| 2017.1 | -0.07 |
| 2017.11 | 2.41 |
| 2017.12 | -0.43 |
| 2017.13 | 4.09 |
| 2017.14 | -2.56 |
| 2017.15 | 3.82 |
| 2017.16 | 0.81 |
| 2017.17 | 1.37 |
| 2017.18 | -1.85 |
| 2017.19 | 2.70 |
| 2017.2 | -3.52 |
| 2017.21 | 1.96 |
| 2017.22 | -2.89 |
| 2017.23 | -0.11 |
| 2017.24 | -2.87 |
| 2017.25 | -3.08 |
| 2017.26 | -0.96 |
| 2017.27 | -1.95 |
| 2017.28 | 1.72 |
| 2017.29 | -0.40 |
| 2017.3 | 0.55 |
| 2017.31 | 2.54 |
| 2017.32 | 0.62 |
| 2017.33 | -0.40 |
| 2017.34 | -0.66 |
| 2017.35 | -3.40 |
| 2017.36 | 1.35 |
| 2017.37 | -0.99 |
| 2017.38 | -2.63 |
| 2017.39 | -8.70 |
| 2017.4 | -19.79 |
| 2017.41 | 5.33 |
| 2017.42 | -6.63 |
| 2017.43 | 11.25 |
| 2017.44 | -3.07 |
| 2017.45 | -7.71 |
| 2017.46 | -8.19 |
| 2017.47 | 13.29 |
| 2017.48 | -2.39 |
| 2017.49 | 1.20 |
| 2017.5 | -0.09 |
| 2017.51 | -1.17 |
| 2017.52 | 6.66 |
The graph shows the 26 week moving average with the help of average of index prices over 5 year period.
(b)
To determine:
To determine the instances where the moving average is crossed from below and the number of week after which the index increases following a cross-through.
Introduction:
For a stock price, the moving average is the average stock price over a certain given time interval. This interval however gets updated with time. In case of a 50 day moving average, the average price is tracked over the prior 50 days.
Answer to Problem 25PS
As per the data, 15 times the index moves below the moving average.
Explanation of Solution
Given Information:
The data is available in the given website.
From the data it is clear that there are 15 instances when the S&P index goes below the moving average. It is seen that 8 times the index goes up in weeks succeeding the cross-through. The index diminishes 7 times in weeks following a cross-through.
(c)
To determine:
To determine the instances where the index crosses through the moving average from above and the number of weeks in which the index increases following a cross-through and decreases following the cross-through.
Introduction:
For a stock price, the moving average is the average stock price over a certain given time interval. This interval however gets updated with time. In case of a 50 day moving average, the average price is tracked over the prior 50 days.
Answer to Problem 25PS
As per the data, 16 times the index moves below the moving average.
Explanation of Solution
Given Information:
The data is available in the given website.
From the data it is clear that there are 16 instances when the S&P index goes above the moving average. It is seen that 10 times the index goes up in weeks succeeding the cross-through. The index diminishes 6 times in weeks following a cross-through.
(d)
To determine:
To determine how well the moving average rule functions in identifying the selling or buying opportunities.
Introduction:
For a stock price, the moving average is the average stock price over a certain given time interval. This interval however gets updated with time. In case of a 50 day moving average, the average price is tracked over the prior 50 days.
Answer to Problem 25PS
This data does not help in predicting the sell or buy opportunities.
Explanation of Solution
Given Information:
The data is available in the given website.
The data which is available and the related calculations that are made do not help in obtaining the rule of relative strength which is needed to identify the buy or sell opportunities. So, this rule will not be applicable in this scenario.
Want to see more full solutions like this?
Chapter 9 Solutions
EBK ESSENTIALS OF INVESTMENTS
- See the chart below. The top line shows the 90 day yield on corporate bonds and the bottom line is the US Treasury bill (TB) rate for similar maturity. The yield is shown on the y-axis. Notice that the gap between the two curves got wider during the recession years of 2008-2009. Which of the following reasons can possibly explain this widening? FRED 6 сл 5 4 3 2 1 0 -1 2006 · 1950 2008 2010 2012 2014 Shaded areas indicate US recessions - 2014 research.stlouisfed.org A) During the recession, the government decided to cut the tax rate on interest earned from corporate bonds but not on interest earned on TB. B) During the recession, the relative risk on corporate bonds increased. C) During the recession, the relative liquidity of corporate bonds increased. D) Two of the first three options can explain this. E) All of the first three options can explain this.arrow_forwardDon't used Ai solutionarrow_forwardDon't used Ai solutionarrow_forward
- Wildcat, Incorporated, has estimated sales (in millions) for the next four quarters as follows: Q1 Q2 Q3 Sales $ 125 $ 145 $ 165 Q4 $ 195 Sales for the first quarter of the following year are projected at $140 million. Accounts receivable at the beginning of the year were $55 million. Wildcat has a 45-day collection period. Wildcat's purchases from suppliers in a quarter are equal to 45 percent of the next quarter's forecast sales, and suppliers are normally paid in 36 days. Wages, taxes, and other expenses run about 20 percent of sales. Interest and dividends are $10 million per quarter. Wildcat plans a major capital outlay in the second quarter of $81 million. Finally, the company started the year with a cash balance of $70 million and wishes to maintain a $30 million minimum balance. a. Complete the following cash budget for Wildcat, Incorporated. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in millions,…arrow_forwardPlease don't use Ai solutionarrow_forward· What does a degree of financial leverage (DFL) of 2.0 indicate? O For every 1 percent change in its EBIT, the firm's EPS will change by 2 percent. O For every 1 percent change in its EBIT, the firm's sales will change by 2 percent. For every 1 percent change in its sales, the firm's EBIT will change by 2 percent. For every 1 percent change in its EPS, the firm's EBIT will change by 0.5 percent. ○ For every 1 percent change in its EPS, the firm's sales will change by 0.5 percent.arrow_forward
- Don't used Ai solutionarrow_forwardDani Corporation has 3.4 million shares of common stock outstanding. The current share price is $84.50, and the book value per share is $8.75. The company also has two bond issues outstanding. The first bond issue has a face value of $71 million, a coupon rate of 5.1 percent, and sells for 95.5 percent of par. The second issue has a face value of $43 million, a coupon rate of 5.7 percent and sells for 104.5 percent of par. The first issue matures in 21 years, the second in 9 years. The most recent dividend was $3.98 a the dividend growth rate is 4.1 percent. Assume that the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both bonds make semiannual payments. The tax rate is 21 percent. What is the company's cost of equity? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16. Cost of equity % What is the company's aftertax cost of debt? Note: Do not round intermediate…arrow_forwardGateway Tours is choosing between two bus models. One is more expensive to purchase and maintain but lasts much longer than the other. Gateway's discount rate is 10.9%. The company plans to continue with one of the two models for the foreseeable future. Based on the costs of each shown here, which should it choose? (Note: dollar amounts are in thousands.) Based on the costs of each model, which should it choose? (Select the best choice below.) OA. Gateway Tours should choose Short and Sweet because the NPV of its costs is smaller. OB. Gateway Tours should choose Old Reliable because it lasts longer. C. Gateway Tours should choose Short and Sweet because the equivalent annual annuity of its costs is smaller. OD. Gateway Tours should choose Old Reliable because the equivalent annual annuity of its costs is smaller. Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Model Year 0 Year 1 Year 2 Year 3 Old Reliable - $201 - $3.9 - $3.9 -$3.9 Year 4 -…arrow_forward
Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author:Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan ProfessorPublisher:McGraw-Hill Education