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What should be the cop-usd exchange rate

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Question - A Big Mac costs 13.900 COP in Colombia, while it costs USD 3.99 in the U.S. The spot rate is 3375 COP/USD.

a) According to PPP, what should be the COP/USD exchange rate?

b) Based on your answer above, explain which currency is over/under-valued.

c) Take the COP as the domestic currency. Calculate the real exchange rate, Rt. According to the Rt, which country is more efficient?

Reference no: EM133148398

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