Which currency is overvalued

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Reference no: EM131999443

Suppose that the price of a car in the US is $25,000 and that the identical car costs 20,850 pounds in the UK. THe current exchange rate is GBPUSD 1.2146. You can magically move 10,000 cars.

a. Which currency is overvalued?

b. How would you take advantage of this situation? What is your total profit per car?

c. What effect would the actions cited in part (b) have on the exchange rate and on the price of the cars in both countries?

Reference no: EM131999443

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