Referring to the information below:Country Big Mac Price Inflation rate (1 year) Rate (1year) USA $5 2% 2.5% Japan Yen 600 1% 1.5% 1) Calculate Implied Exchange Rate (show calculation) and indicate if its overvalued or undervalued given that actual Exchange Rate is 150 yen per dollar;2) calculate forward exchange rate using interest rate parity theory; and3) calculate real exchange rate. 20. Referring to the information below:CountryBig Mac Price Inflation rate (1 year) Rate (lyear)USAS52%2.5%JapanYen 6001%1.5%1) Calculate Implied Exchange Rate (show calculation) and indicate if its overvalued orundervalued given that actual Exchange Rate is 150 yen per dollar2) calculate forward exchange rate using interest rate parity theory; and3) calculate real exchange rate.

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Answered: Referring to the information below:…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Referring to the information below:

Country Big Mac Price Inflation rate (1 year) Rate (1year)

USA $5 2% 2.5%

Japan Yen 600 1% 1.5%

1) Calculate Implied Exchange Rate (show calculation) and indicate if its overvalued or undervalued given that actual Exchange Rate is 150 yen per dollar;

2) calculate forward exchange rate using interest rate parity theory; and

3) calculate real exchange rate.

20. Referring to the information below:
Country
Big Mac Price Inflation rate (1 year) Rate (lyear)
USA
S5
2%
2.5%
Japan
Yen 600
1%
1.5%
1) Calculate Implied Exchange Rate (show calculation) and indicate if its overvalued or
undervalued given that actual Exchange Rate is 150 yen per dollar
2) calculate forward exchange rate using interest rate parity theory; and
3) calculate real exchange rate.

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