Explanation:
The solution shows that the correct answer is B. The EWMA model uses exponentially decreasing weights where the most recent observation has the highest weight (1-λ) = 15%, and previous observations have weights that decrease exponentially by a factor of λ = 85%. The weight for period t-2 is calculated as (1-λ)*λ = 12.75%.
The most recent weight is the highest at (1-lambda); in this case, 1 - 85% = 15%. As successive weights have a constant proportion of lambda, the (t-2) weight = (1-lambda)*lambda; in this case, (1-85%)*85% = 12.75%
A
B
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