Question: 10. An exchange rate has a given expected future value and standard deviation. A. Assuming that the exchange rate is normally distributed, what are the

10. An exchange rate has a given expected future value and standard deviation.

A. Assuming that the exchange rate is normally distributed, what are the probabilities that the exchange rate will be at least 2 or 3 standard deviations away from its mean?

B. Assume that you do not know the distribution of exchange rates. Use Chebyshev’s inequality (that at least 1 − 1/k2 proportion of the observations will be within k standard deviations of the mean for any positive integer k greater than 1) to calculate the maximum probabilities that the exchange rate will be at least 2 or 3 standard deviations away from its mean.

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