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Attached is the spreadsheet called data lecture 9 homework. It has historical exchange rate data for the number of USD/GBP. The rate at the beginning of that period is 1.4 and then you see data for each day for the following 60 days.

This question is in two parts. First, you compute the volatility (annualized standard deviation) as a percentage. Hint: The answer is between 8% and 10% but I want you to get the answer to six decimal places). Use Excel (specifically the STDEV function). Assume that there are 252 days in a year. Second, I want you to use your answer to compute the price (premium) of a put option written on one million british pounds.

The spot fx rate (the number of usd per gbp) to use is 1.3284 (use 1.328400 exactly).

The usd interest-rate is 5% (continuously-compounded).

The gbp interest-rate is 6% (continuously-compounded).

The option maturity is 60 days (assume 365 days in a year so the option maturity is 60/365 years precisely) and you use the volatility (but do not round) computed in the first part. The option is a put option on pounds with strike 1.3100. The put option is written on one million pounds, what is the premium paid in US dollars (correct to the nearest dollar). Use Excel.

Remember for N you use NORMSDIST and you need LN (natural = base e) for log.

Now enter your answers for (1) the volatility (as a percentage to 6 decimal places), and (2) the premium paid in US dollars (correct to the nearest US dollar).

		Fx rate		Fx rate is the number of usd per gbp
	Day	at mid-day
	0	1.4
	1	1.407893
	2	1.405816
	3	1.409696
	4	1.412912
	5	1.409997
	6	1.399457
	7	1.403906
	8	1.398693
	9	1.383506
	10	1.391324
	11	1.378674
	12	1.373626
	13	1.382351
	14	1.369696
	15	1.364902
	16	1.364047
	17	1.359069
	18	1.357418
	19	1.350042
	20	1.354435
	21	1.363759
	22	1.355188
	23	1.353608
	24	1.35479
	25	1.361145
	26	1.378733
	27	1.38327
	28	1.380121
	29	1.374073
	30	1.374131
	31	1.369453
	32	1.352464
	33	1.344458
	34	1.341746
	35	1.353759
	36	1.339699
	37	1.33156
	38	1.329366
	39	1.340124
	40	1.346712
	41	1.348507
	42	1.35161
	43	1.360993
	44	1.350521
	45	1.345453
	46	1.334493
	47	1.324213
	48	1.320807
	49	1.332196
	50	1.328057
	51	1.333306
	52	1.346545
	53	1.348109
	54	1.350798
	55	1.355252
	56	1.35093
	57	1.335438
	58	1.325542
	59	1.323049
	60	1.328421

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