Skip to content

CMA Final · Strategic Financial Management · Fundamental Analysis and Technical Analysis

The closing prices of a share of Sundaram Textiles over five consecutive days are Rs 48, Rs 50, Rs 52, Rs 54 and Rs 56. The 5-day exponential moving average uses a smoothing factor k = 2/(n+1). If the previous day's EMA was Rs 50 and today's close is Rs 56, what is today's 5-day EMA?

Today's EMA is Rs 52. The smoothing factor for a 5-day EMA is 2/6, one third, so the EMA equals the previous EMA of Rs 50 plus one third of the difference between today's close of Rs 56 and Rs 50, which adds Rs 2.

  1. ARs 52.00Correct
  2. BRs 53.00
  3. CRs 54.00
  4. DRs 56.00

Explanation

k = 2/(5+1) = 1/3. EMA = 50 + (1/3)(56 − 50) = 50 + 2 = Rs 52. Rs 53 results from using k = 0.5, which is the wrong smoothing factor. Rs 54 is the simple average of closes in a wrong window.

Did you get it right without looking?

One question tells you little. A timed set on Fundamental Analysis and Technical Analysis shows your real accuracy, how long you take and where you lose marks.

Practise Fundamental Analysis and Technical AnalysisFree diagnostic mock

More Fundamental Analysis and Technical Analysis questions