Identical basket of goods and services are equalise

Assignment Help Financial Management

Reference no: EM131622824

Analyse the current state of the financial markets.

An amusing of purchasing power parity is the Economist's Big Mac Index. Under PPP, movements in countries' exchange rate should in the long-term mean that the prices of an identical basket of goods and services are equalise.

The McDonalds Big Mac represents this basket.

The index compares local Big Mac prices with the price of Big Macs in America. This comparaison is used to forecast what exchange rates should be, and this is then compared with the actual exchange rates to decide which currencies are over and undervalued.

Question:

Choose the US dollar currency from the Economist's Big Mac index. Conduct a secondary research on that US dollar currency and its recent trends.

Analyse their historical values and determine whether they have been over or undervalued based on the Big Mac index.

You must use 400 words for that question.

Reference no: EM131622824

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