What is the extent of sar undervaluation

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Reference no: EM13563033

Question:

USD price of Big Mac in South Africa and the US are $4.50 and $3.90 respectively. The price of Big Mac in South African Rand is also 37.05. PPP implied exchange rate of South African Rand is 9.50 SAR per dollar. What is the extent of SAR undervaluation or overvaluation (Calculate it in percentages)

Hint: You need to find the exchange rate between SAR and USD first from the information given, then find the percent under/over valuation.

13.36% Undervaluation

15.38% Overvaluation

20% Overvaluation

10% Undervaluation

Annual inflation rates and exchanges rates in the US and Brazil were as follows
Date USD/BRL PI_BRL PI_US
2009 2.6800 112 103
2010 1.8500 122 106
2011 1.5700 129 108
What would be the real exchange rate of BRL in 2011 if we used 2009 as base year.

1.5334

1.2345

1.9545

1.8752

Suppose that on January 1st the annual cost of borrowing in JPY and US dollars are 2% and 7% respectively (Rjpy=2% and RUS=7%). The spot rate of USD on January 1st is USD/JPY110 or 110 ¥ per $. One year forward rate was quoted as USD/JPY102 or 102. What is the USD cost of borrowing in JPY? Or what is the rate of borrowing in USD?

-5.4%

2%

10%

7%

Suppose on that on January 1st a Mexican firm borrows $20 million from Citibank (USA) for one year at 8.00% interest per annum. The loan was taken when the spot rate was USD/MXP3.40. At the end of the one year when the loan was repaid, the exchange rate was USD/MXP 5.80. Based on the above information, calculate the Mexican Peso cost of the dollar loan in percentages.

8.00 %

20%

45.72%

84.24%

18.45%

Sony of Japan produces PSP hand held players and exports them to the United States. Last year the exchange rate was JPY75/$ and Sony charged $199 per PSP player. Currently the spot exchange rate is 85/$ and Sony is charging $179 per PSP player. What is the degree of pass through by Sony of Japan on their PSP players?

87.9%

85.43%

73.2%

4.1%

If possible, please give step by step how to solve this for future problems

Reference no: EM13563033

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