What percentage had the pound sterling devalued

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During the currency crisis of September 1992, the Bank of England borrowed DM 33 billion from the Bundesbank when a pound was worth DM 2.78 or $1.912. It sold these DM in the foreign exchange market for pounds in a futile attempt to prevent a devaluation of the pound. It repaid these DM at the post-crisis rate of DM 2.50:£1. By then, the dollar: pound exchange rate was $1.782:£1.

Problem 1: By what percentage had the pound sterling devalued in the interim against the Deutsche mark as well against the dollar?

Problem 2: Assume annual inflation rates in the US and Australia are 6% and 4% respectively, and the spot rate is US$0.75 per AUD (indirect quote). What is the value of AUD in 1 and 2 years?

Reference no: EM132911343

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