Solve the following problem:
Measuring Exchange Rate Volatility
Here are exchange rates for the Japanese yen and British pound at the beginning of each of the last 5 years. Your firm wants to determine which currency is more volatile as it assesses its exposure to exchange rate risk. Estimate the volatility of each currency's movements.
| Beginning of year YEN |
POUND.
|
|
1
|
0.008
|
1 47
|
|
2
|
0.011
|
1.46
|
|
3
|
0.008
|
1.51
|
|
4
|
0.01
|
1.54
|
|
5
|
0.012
|
1.52
|