Homework Answers
4.
Implied US-AUD exchange rate = 5.28/5.90
Implied US-AUD exchange rate = .895
Implied NZ-AUD exchange rate = 6.2/5.90
Implied NZ-AUD exchange rate = 1.051
2.
Against US dollar, AUD is undervalued as it is weaker in market, but implied value is strong.
Degree of undervaluation = (.808/895 -1) = 9.72% (-ve)
Against NZ dollar, AYD is overvalued as it is stronger in market, but implied value is weak.
Degree over overvaluation = 1.093/1.051 – 1 = 4%
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Problem 4 The Economist magazine uses the price of Big Macs in different countries to calculate...
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8. Purchasing-power parity Using data from The Economist's Big Mac Index for 2016, the following table...
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Using data from The Economist's Big Mac Index for 2016,
the following table shows the local currency price of a Big Mac in
several countries as well as the actual exchange rate between each
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a Big Mac would have cost you $4.93 in the United States and GBP
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