The Turkish lira (TRY) was officially devalued by the Turkish government in February 2001 during a severe political and economic crisis. The Turkish government announced on February 21 that the lira would be devalued by 20%. The spot exchange rate on February 20 was TRY68,000=1USD.
a. What was the exchange rate after the 20% devaluation?
b. Within three days the lira had plummeted to more than TRY100,000/1USD. What percentage change was this from the pre-devaluation rate?
c. Evaluate why the value of the TRY was different from the 20% devaluation sought by the government.