Reference no: EM133076098

Please help me answer the following: 

While throughout the Western countries, exchange rates were not settling down, especially during October 1992, Royal Bank of Scotland (RBS) borrowed Swiss Franc CHF66 billion from Switzerland when a pound was worth CHF2.78 or US$1.92. On December 14, 1992, RBS sold these Francs in the foreign exchange market at the rate of CHF2.50/£1. On that day, the exchange rate between dollar and pound was $1.78/£1. 

1. By what percentage had the pound sterling changed (revalued or devalued) in the interim against the Swiss Franc? Against the dollar? 
2. Given the above spot rates of pound against CHF and US$ on December 14, 1992, suppose, on the same day, the three-month forward rate for the pound was CHF2.10 and US$1.85. Was the pound selling at a premium or discount against CHF and US$? If so, at what percentage the pound was selling at premium or discount against CHF and US$? 
3. In an environment of extreme volatility, the central bank of a country (e.g., Bank of England) can take different measures to intervene in the foreign exchange market. Define those intervention options/measures. What does the central bank do if the value of domestic currency is very high or very low?