Question: 1. Exploratory data analysis I: 10 points Daily foreign exchange rates (spot rates) can be obtained from the Federal Reserve Bank in St Louis (FRED).

1. Exploratory data analysis I: 10 points Daily foreign exchange rates (spot rates) can be obtained from the Federal Reserve Bank in St Louis (FRED). The data are the noon buying rates in New York City certied by the Federal Reserve Bank of New York. Consider the exchange rates between the U.S. dollar and the Euro from January 3, 2005 to March 3 2005. See the le \Dol- lar Euro Exchange Rate.xlsx". The le has four columns, namely year, month, day, and euro, respectively, where euro denotes the US dollars of one Euro. Answer the following questions: (a) Compute the daily log return of the exchange rate. (b) Compute the sample mean, standard deviation, skewness, excess kurtosis, minimum, and maximum of the log returns of the exchange rate. (c) Obtain a histogram plot of the daily log returns of Dollar-Euro exchange rate. (d) Test H0:u= 0 versus H1 u is not equal to 0, where u denotes the mean of the daily log return of Dollar-Euro exchange rate. (e) Are the log returns of the exchange rate normally distributed? Why?

2005	1	3	1.3476
2005	1	4	1.3295
2005	1	5	1.3292
2005	1	6	1.3187
2005	1	7	1.3062
2005	1	10	1.3109
2005	1	11	1.3161
2005	1	12	1.3281
2005	1	13	1.3207
2005	1	14	1.3106
2005	1	18	1.3043
2005	1	19	1.3036
2005	1	20	1.2959
2005	1	21	1.3049
2005	1	24	1.3041
2005	1	25	1.2954
2005	1	26	1.3081
2005	1	27	1.3032
2005	1	28	1.3033
2005	1	31	1.3049
2005	2	1	1.3017
2005	2	2	1.3015
2005	2	3	1.2959
2005	2	4	1.2927
2005	2	7	1.2773
2005	2	8	1.2783
2005	2	9	1.2797
2005	2	10	1.2882
2005	2	11	1.2864
2005	2	14	1.2981
2005	2	15	1.2986
2005	2	16	1.2994
2005	2	17	1.3083
2005	2	18	1.3075
2005	2	22	1.323
2005	2	23	1.3208
2005	2	24	1.3205
2005	2	25	1.3195
2005	2	28	1.3274
2005	3	1	1.3189
2005	3	2	1.3127
2005	3	3	1.313

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