Suppose that you have computed the historical average forward rate variance with weekly data.To convert this to an annual variance,use the following adjustment:

Question

Quizplus · Accepted Answer

To convert weekly variance to annual variance, we need to adjust for the number of weeks in a year. Since there are 52 weeks in a year, we need to divide the weekly variance by 52 to get the annual variance. Therefore, the correct adjustment is Variance (Annual) = Variance (Weekly) * (1/52) or Variance (Annual) = Variance (Weekly) / 52. Choice B represents this adjustment, making it the correct answer.

Suppose That You Have Computed the Historical Average Forward Rate