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The Turkisk lira (TL) was officially devalued by the Turkish government in February 2001 during a...

The Turkisk lira (TL) was officially devalued by the Turkish government in February 2001 during a severe political and economic crisis. The Turkish government announced on February 21st that the lira would be devalued by 20 %. The spot exchange rate on February 20th was TL 65,000 divided by $. a. What was the exchange rate after devaluation? b. What was the percentage change after falling to TL 95,000 divided by $ on February 24, three days after the devaluation?

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Answer #1
Spot rate, February 20, 20xx (TL/$) 65000
Turkish government announces a devaluation of -20.00%
Spot rate, February 24, 20xx (TL/$) 95000
a)
a. What was the exchange rate after devaluation?
Spot rate after devaluation = 65000 / (1+ -20%) 81250
b. What was percentage change after falling to TL95,000/$?
Percentage change from initial value =(65000-95000)/95000 -31.58%
Percentage change from "devalued" value = (81250-95000)/95000 -14.47%
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