Go to the Bank of England currency website and download one year of daily exchange rates for any currency.

Calculate the daily percentage change for each day.

a What percentage of movements are negative? What would you expect it to be?

b Statistics tells us that a normal distribution should have 1 per cent of the observations below 2.3623 standard deviations from the mean. Is this true of your data?

c What is the biggest one-day fall in your data? How many standard deviations is that below the mean?

d Calculate the probability of this observation or less according to the normal distribution using the Excel formula

=NORM.S.DIST(-1.96,TRUE) where you replace ‘-1.96’ with your answer to

c. What do you conclude from your findings?