Actual exchange rate to the ppp implied exchange rate

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Reference no: EM131568008

Asume Purchasing power parity holds, Mcdonald’s Big Mac Price is 3.68 in New Yock and GBP 2.63 in London. The actual spot rate in GBP 0.764 $1. Comparing the actual exchange rate to the PPP implied exchange rate, how much is GBP under or overvale?

A. Implied PPP rate shows the actual rate of GBP is 6.9% under-valued

B. Implied PPP rate shows the actual rate of GBP is 6.9% Over-valued

C. Implied PPP rate shows the actual rate of GBP is 6.45% under-valued

D. Implied PPP rate shows the actual rate of GBP is 6.45% Over-valued

E. Non of the Above

Reference no: EM131568008

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