a question said that the 30 day moving average of an index that has been going up over the past 60 days will be below the current price. what if the price went from 2 to 100 in the first thirty days and then steadily declined for thirty days to 30. the 30 day moving average would be higher than 30. but the price is up over the last 60 days. what am i doing wrong here?
In your case, the price goes up drastically and then back down. I think that the question just assumes a gradual increase in prices over the past 60 days. If this were the case, then the 30 day moving average would be < current price
the question says “been increasing over the past two months”. the price move doesn’t have to be drastic. i just used the drastic move to prove a point. all that needs to be true is that the average of the last 30 days prices is higher than the current price.
How can you have an average that is higher than current price?
pepp. price d1 46 d2 45 d3 44 3 day average 45 current 44
post the question.
i chose “can’t be determined” precisely because they said moved higher over 60 days and were asking about 30 day average.
A sudden dramatic downward move with a long standing high price would do it. stock at 100/share for 100 days moves to 10 on day 101. Average is 99.1 while current price is 10. Same in reverse. Have a stock at 10 for 100 days that moves to 100 on day 101. Average is 10.89 while current is 100.
if a price index has been increasing over the past two months, where would the 30-day moving average lie relative to the current index level? a. it would lie on it b. it would lie above it c. it would lie below it d. cannot be determined without additional information
Really vague question, but I’d say it’d lie below it. or D.
I got this wrong on the test. I believe the answer was C. I think what they were looking for is that, if the stock were increasingly every day over 60 days… that is, no downward moves… just up and up and up… then the current price would always be above the 30 day moving average.
I think that if the price index increased drastically and then decreased (as given in your initial example), they would not have phrased it as “increasing over the past two months”. They should say, it increased over the first 30 days and then has been decreasing over the last month. If they said that the trend was upward moving, or something more vague, then I could see some ambiguity, but in this case, you just have to assume that the index is moving upward (ie from 1000 to 2000) in a relatively straight line.
answer is c
i just took this one in book 6 exam 2 morning sesh and got tied up as well… i chose C bc i figured if its been rising for 60 days the current price has to be higher than the original, meaning > than the avg… i also read somewhere that nowhere in the exam will there be an answer that is “none of the above”, “needs more info”, “cant be determined” or the like… so i have no idea why schweser would include the option in a practice exam
I think your thinking a bit too hard. Go with the simplest of the answers. I believe its implying that for the each of the past 60 days, the current day is higher than the previous day. I agree it should be worded a bit better, but still…
Yes, since it is constantly increasing for the last 60 days, the value to day would be greater than all the values in the last 60 days, so the moving average would be below.