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8. 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.

8. 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 has the lira devalued against the DM?

b. By how much has 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 Italys lira losses on this currency intervention?

d. Suppose Germany spent DM 24 billion in an attempt to defend the lira. What were the Bundesbanks DM losses on this currency intervention?

show ALL calculations.

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