Question: 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.

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

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