On Friday, September 13, 1992, the lira was worth DM 0.0013065. Over the weekend, the lira devalued against the DM to DM 0.0012613.
a. By how much had the lira devalued against the DM?
b. By how much had the DM appreciated against the lira?
c. Suppose Italy borrowed DM 4 billion, which it sold to prop up the lira. What were the Bank of Italy’s lira losses on this currency intervention?
d. Suppose Germany spent DM 24 billion in an attempt to defend the lira. What were the Bundesbank’s DM losses on this currency intervention?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.