question archive In practice, people often use The Big Mac index, which provides an interesting perspective into the determination of foreign exchange rates; in Canada, a Big Mac is selling at C$6
In practice, people often use The Big Mac index, which provides an interesting perspective into the determination of foreign exchange rates; in Canada, a Big Mac is selling at C$6
Subject:FinancePrice:2.86 Bought3
In practice, people often use The Big Mac index, which provides an interesting perspective into the determination of foreign exchange rates; in Canada, a Big Mac is selling at C$6.06, while it costs P200.60 in the Philippines. The official exchange rate is C$1 = P36.94. If the purchasing power of parity (PPP) is considered, is the peso overvalued or undervalued? What will be your answer if Big Mac costs P225 in the Philippines?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Rate of Big Mac in canada= C$ 6.06
Rate of BigMac in Philipines= P 200.60
As per Big Mac index C$ 1= 200.60/6.06= P 33.1023, official exchane rate= C$ 1= P 36.94
As per BigMac C$1=P 33.1023 whileas official exchane rate is P 36.94, the Peso is undervalued
If Big Mac costs P 225, that in C$= 225/6.06= 37.1287, The Peso will turn overvalued
