Over the past 12 years, the common stock of The Flower Shoppe has produced an arithmetic average return of 12.6 percent and a geometric average return of 12.3 percent. What is the projected return on this stock for the next five years according to Blume's formula

Return for next 5 year = 12.49%

Explanation:

N = number of forward years

T = number of past years

Blume's formula = ((Next n years - 1)/ Past T years - 1) * Geometric return + (N-T)/(N-1)* Arithmetic Average

Return for next 5 year = (5-1/12-1) * 0.123 + (12-5/12-1) * 0.126

Return for next 5 year = (4/11) * 0.123 + (7/11) * 0.126

Return for next 5 year = 0.04473 + 0.08018

Return for next 5 year = 0.12491

Return for next 5 year = 12.49%

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

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