On New Year's Day 2021, the actual exchange rate of USD:CNY was 6.5306. A professor once suggested the "Big Mac" index was a useful way to calculate the purchasing price parity of currencies around the world. He noticed the following: Cost of a Big Mac Hamburger (BMH)in New York City BMH:USD = 5.00 Cost of a Big Mac Hamburger in Beijing BMH:CNY = 18.00 Cost of a Starbucks Coffee (SBC) in New York SBC:USD = 3.50 Cost of a Starbucks Coffee in Beijing SBC:CNY= 35.00 a) Calculate the implied USD:CNY exchange rate based on a Big Mac O 90 O 3.6 O Cannot be computed from the information given
On New Year's Day 2021, the actual exchange rate of USD:CNY was 6.5306. A professor once suggested the "Big Mac" index was a useful way to calculate the purchasing price parity of currencies around the world. He noticed the following: Cost of a Big Mac Hamburger (BMH)in New York City BMH:USD = 5.00 Cost of a Big Mac Hamburger in Beijing BMH:CNY = 18.00 Cost of a Starbucks Coffee (SBC) in New York SBC:USD = 3.50 Cost of a Starbucks Coffee in Beijing SBC:CNY= 35.00 a) Calculate the implied USD:CNY exchange rate based on a Big Mac O 90 O 3.6 O Cannot be computed from the information given
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION 7
On New Year's Day 2021, the actual exchange rate of USD:CNY was 6.5306.
A professor once suggested the "Big Mac" index was a useful way to calculate the purchasing price parity of currencies around the
world. He noticed the following:
Cost of a Big Mac Hamburger (BMH)in New York City BMH:USD = 5.00
Cost of a Big Mac Hamburger in Beijing BMH:CNY = 18.00
Cost of a Starbucks Coffee (SBC) in New York SBC:USD = 3.50
Cost of a Starbucks Coffee in Beijing SBC:CNY= 35.00
%3D
a) Calculate the implied USD:CNY exchange rate based on a Big Mac
90
3.6
Cannot be computed from the information given
QUESTION 8
An investor owns a EUR10 million bond with five years to maturity and receives semi-annual interest at a fixed annual rate of
5%. He notices the yield curve is inverting and wants to swap to receiving floating six-month Euribor to take advantage of higher short-
term rates in the future.
b) At some later reset date, the six-month Euribor is set at 6%. What is the payment six months later?
O The investor pays EUR 50,000
The investor receives EUR 50,000
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