Cross-Exchange Rate Assignment | Homework For You

10. As it is discussed in Chapter 3, the European Monetary System, suppose the central rates within the exchange rate mechanism for the French franc (FF) and Deutsche mark (DM) are FF 6.90403:ECU 1 and DM 2.05853:ECU 1, respectively.
a. What is the cross-exchange rate between the franc and the mark, FF per DM and DM per FF? (4%)
b. Under the original 2.25% margin on either side of the central rate, what were the approximate upper and lower intervention limits for France and Germany, i.e., FF per DM and DM per FF? (5%)
c. Under the revised 15% margin on either side of the central rate, what are the current approximate upper and lower intervention limits for France and Germany? (5%)
d. What potential costs and benefits might be associated with the decision to widen the margins within which some currencies in the ERM can float? (5%) Get Finance homework help today