The yield-to-maturity has stayed constant year-over-year

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Reference no: EM131997716

1. In China a Big Mac costs Yuan 16 (local currency), while in the US the same Big Mac costs $4.56. The exchange rate between Yuan and US dollar is Yuan 6.1341/$. According to purchasing power parity, is Chinese Yuan overvalued or undervalued? Why?

2. The price of the bond has dropped, even though the yield-to-maturity has stayed constant year-over-year. In one sentence, explain why the price dropped.

Reference no: EM131997716

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