In: Finance
MXNUSD .047 in nominal currency exchange rate terms. A Big Mac costs $3.99 in the U.S. and 50 Pesos in Mexico. Please select the correct answer.
I. |
The Mexican Peso in undervalued. I am better off purchasing the Big Mac in Mexico. |
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II. |
The Mexican Peso in undervalued. I am better off purchasing the Big Mac in the U.S. |
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III. |
The Mexican Peso in overvalued. I am better off purchasing the Big Mac in Mexico. |
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IV. |
The Mexican Peso in overvalued. I am better off purchasing the Big Mac in the U.S. |
As per the exchange rate the Mig MAc should cost = 3.99 / 0.047 = 84.89 peso.
It means that the Maxican peso is overvalued and we should purchased Big Mc from Maxico itself.
Option IV is correct. The Mexican Peso in overvalued. I am better off purchasing the Big Mac in the U.S