An exchange rate is currently 0.8000. The volatility of the exchange rate is quoted as 12% and

Question:

An is currently 0.8000. The volatility of the is quoted as 12% and interest rates in the two countries are the same. Using the lognormal assumption, estimate the probability that the in three months will be (a) less than 0.7000, (b) between 0.7000 and 0.7500, (c) between 0.7500 and 0.8000, (d) between 0.8000 and 0.8500, (e) between 0.8500 and 0.9000, and (f) greater than 0.9000. Based on the volatility smile usually observed in the market for exchange rates, which of these estimates would you expect to be too low and which would you expect to be too high? Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...