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Pilot paper Q2 - the volatility

Nnguyenha21614y ago
Dear Sir,

I would like to ask about how to caculate the annual volatility in Q2,b) of Pilot Paper.
The answer have the annual volatility of sterling/EUR = 0.22.
It should come from which stated in the Question: "the monthly volatility of the Euro against sterling is 6.35 per cent". Howerver I don't know how it results in 0.22.

Thanks for your effort,

Ha
Former userFormer user14y ago#1
6.35%*?12=0.22
Former userFormer user14y ago#2
6.35%*?12=0.22
John MoffatJohn MoffatTutor14y ago#3
serena is correct :)
Nnguyenha21614y ago#4
Thanks teacher and Serana.
Now I know how to caculate it. However, I don't know how to caculate the Sterling Euro forward (indirect) 1.4426 (pls see the answer in question 2)

Thanks a lot,

Ha
John MoffatJohn MoffatTutor14y ago#5
He has used the interest rate formula (Fo=So x (1+hc)/(1+hb))) on the formula sheet.
Remember that the interest rates quoted are always yearly rates, and so for the 3-monthly interest rates you divide by 4.
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