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Determine in percentage the undervalued or overvalued amount

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Question - Coffee Inc opened its first store in Country A in October 2020. The price of the cappuccino in Country A is A$25.70. In Chicago, the price of a cappuccino is $2.65. The exchange rate between Country A's A$ and U.S. dollars is A$5.6288/$. According to purchasing power parity, Country A's currency is either undervalued or overvalued. With calculation, determine in percentage the undervalued or overvalued amount and explain what is the implication of Country A's currency valuation for a forex trader.

Reference no: EM133145683

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