An exchange rate is currently 1.0 and the implied volatilities of six-month European options with strike prices

Question:

An exchange rate is currently 1.0 and the implied volatilities of six-month European options with strike prices 0.7, 0.8, 0.9, 1.0, 1.1, 1.2, and 1.3 are 13%, 12%, 11%, 10%, 11%, 12%, and 13%. The domestic and foreign risk free rates are both 2.5%. Calculate the implied probability distribution using an approach similar to that used in the appendix for Example 20A.1. Compare it with the implied distribution where all the implied volatilities are 11.5%.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most... 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...