Question

USD/RUB 75.70 in nominal currency exchange rate terms. The same Dell computer costs $1,350.00 in the U.S. and 102,900.00 Rubles in Russia, Please select the best answer choice below.

	I.	I would expect to pay $1,359.31 for the Dell in the U.S. The Ruble is undervalued and I am better off buying the Dell in the U.S.
	II.	I would expect to pay $1,359.31 for the Dell in the U.S. The Ruble is overrvalued and I am better off buying the Dell in the U.S.
	III.	I would expect to pay $1,350 for the Dell in the U.S. The Ruble is undervalued and I am better off buying the Dell in the U.S.
	IV.	I would expect to pay $1,359.31 for the Dell in the U.S. The Ruble is undervalued and I am better off buying the Dell in Russia.

Answer 1

Currency exchange rate = RUB 75.70 / USD

Dell Computer Cost in U.S = $1,350

Dell Computer Cost in Russia = 102,900 Rubles

= 102,900 Rubles / (RUB 75.70 / USD)

= $1,359.31308

= $1,359.31

Dell Computer Cost is cheaper in U.S than in Russia as Rubel is undervalued

I would expect to pay $1,350 for the Dell in the U.S. The Ruble is undervalued and I am better off buying the Dell in the U.S

Option III is correct