Explanation

Step 1: Calculate the daily return Return (r_t) = ln(30.50/30.00) = ln(1.016667) = 0.016529

Step 2: Square the return r_t² = (0.016529)² = 0.0002732

Step 3: Apply EWMA formula The EWMA variance update formula is: σ_t² = λ × σ_{t-1}² + (1-λ) × r_t²

Given:

• λ = 0.94
• σ_{t-1} = 1.5% = 0.015
• σ_{t-1}² = (0.015)² = 0.000225
• r_t² = 0.0002732

σ_t² = (0.94 × 0.000225) + (0.06 × 0.0002732) σ_t² = 0.0002115 + 0.000016392 σ_t² = 0.000227892

Step 4: Calculate updated volatility σ_t = √0.000227892 = 0.015095 = 1.5095%

Correct Answer: B (1.5085%) - The calculation gives approximately 1.5095%, which rounds to the closest option of 1.5085%.