1. Plot the exchange and bill rates separately against time on EXCEL or Tableau. What do you observe on the movement of these prices during the Global Financial Crisis (late 2008)? 1

2. Calculate the returns of each rate using the following: rt = 100 ln Pt Pt?1 where Pt is the rate at time t. Plot the returns for each rate.

3. Create a histogram for each of the returns series and report their descriptive statistics including mean, median, mode, variance, standard deviation, skewness and kurtosis. What conclusion can you draw by examining the kurtosis in each case?

4. Under the assumption that the returns of each rate are drawn from an independently and identically distributed normal distribution, are the expected returns statistically different from zero for each rate? State clearly the null and alternative hypothesis in each case.

5. Assume the returns of each rate are independent from each other, are the mean returns statistically different from each other?

6. Calculate the correlation matrix of the returns.

7. Is the assumption of independence realistic? If not, re-test the hypotheses in Question 5 using appropriate test statistics. Compare the results to the results obtained in Question 5.

8. If you can only choose maximum of two rates into a portfolio, which will you choose? What are the optimal weights and the optimal expected returns? State clearly your objective function and provide step-by-step derivations.

9. Bonus question:Why is it not realistic to assume these rates follow a normal distribution? Moreover, is Treasury Bill safer than the other three exchange rates?

I have attached the Exchange rates required to use for the answers to these questions.

Thankyou in advance!