The table below shows hypothetical prices of a tall Starbucks latte in countries around the world. Using the data, and the fact that a atte costs $2 in the United States, calculate how much a country's currency is under- or overvalued according to purchasing power First, calculate the implied exchange rate for each country. Next, calculate the "latte index" for each country using the Big Mac inde ormula from the chapter. nstructions: Round your answers to two decimal places. Country Thailand. Argentina United Kingdom Japan Price 50 baht 10 peso(s) 1 pound(s) 400 yen Official exchange rate 25 baht/dollar 5 pesos/dollar 0.6 pounds/dollar 70 yen/dollar Implied exchange rate if PPP holds baht/dollar pesos/dollar pounds/dollar yen/dollar Cost of U.S. latte % % % %
The table below shows hypothetical prices of a tall Starbucks latte in countries around the world. Using the data, and the fact that a atte costs $2 in the United States, calculate how much a country's currency is under- or overvalued according to purchasing power First, calculate the implied exchange rate for each country. Next, calculate the "latte index" for each country using the Big Mac inde ormula from the chapter. nstructions: Round your answers to two decimal places. Country Thailand. Argentina United Kingdom Japan Price 50 baht 10 peso(s) 1 pound(s) 400 yen Official exchange rate 25 baht/dollar 5 pesos/dollar 0.6 pounds/dollar 70 yen/dollar Implied exchange rate if PPP holds baht/dollar pesos/dollar pounds/dollar yen/dollar Cost of U.S. latte % % % %
Chapter29: International Finance
Section: Chapter Questions
Problem 8P
Related questions
Question
![The table below shows hypothetical prices of a tall Starbucks latte in countries around the world. Using the data, and the fact that a
latte costs $2 in the United States, calculate how much a country's currency is under- or overvalued according to purchasing power.
First, calculate the implied exchange rate for each country. Next, calculate the "latte index" for each country using the Big Mac index
formula from the chapter.
Instructions: Round your answers to two decimal places.
Country
Thailand
Argentina
United Kingdom
Japan
Price
50 baht
10 peso(s)
1 pound (s)
400 yen
Official exchange
rate
25 baht/dollar
5 pesos/dollar
0.6 pounds/dollar
70 yen/dollar
Implied exchange rate
if PPP holds
baht/dollar
pesos/dollar
pounds/dollar
yen/dollar
Cost of U.S. latte
%
%
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffe60b8ca-eedf-45d0-98d7-6f8efd9e6473%2F4c96d3ce-9847-4f1f-b8aa-1a164fea3763%2Fm4h1ph_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The table below shows hypothetical prices of a tall Starbucks latte in countries around the world. Using the data, and the fact that a
latte costs $2 in the United States, calculate how much a country's currency is under- or overvalued according to purchasing power.
First, calculate the implied exchange rate for each country. Next, calculate the "latte index" for each country using the Big Mac index
formula from the chapter.
Instructions: Round your answers to two decimal places.
Country
Thailand
Argentina
United Kingdom
Japan
Price
50 baht
10 peso(s)
1 pound (s)
400 yen
Official exchange
rate
25 baht/dollar
5 pesos/dollar
0.6 pounds/dollar
70 yen/dollar
Implied exchange rate
if PPP holds
baht/dollar
pesos/dollar
pounds/dollar
yen/dollar
Cost of U.S. latte
%
%
%
%
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