Let diffbp be the changes (that is, differences) in the variable bp, the U.S. dollar to British pound exchange rate, which is in the Garch data set of R’s Ecdat package.  (a) Create a 3 × 2 matrix of...

Let diffbp be the changes (that is, differences) in the variable bp, the U.S. dollar to British pound exchange rate, which is in the Garch data set of R’s Ecdat package.

 (a) Create a 3 × 2 matrix of normal plots of diffbp and in each plot add a reference line that goes through the p- and (1 − p)-quantiles, where p = 0.25, 0.1, 0.05, 0.025, 0.01, and 0.0025, respectively, for the six plots. Create a second set of six normal plots using n simulated N(0, 1) random variables, where n is the number of changes in bp plotted in the first figure. Discuss how the reference lines change with the value of p and how the set of six different reference lines can help detect nonnormality.

 (b) Create a third set of six normal plots using changes in the logarithm of bp. Do the changes in log(bp) look closer to being normally distributed than the changes in bp?