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 $3 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. Official exchange Country Thailand Argentina United Kingdom Japan Price 60 baht 15 peso (s) 2 pound(s) 450 yen rate 30 baht/dollar 6 pesos/dollar 0.5 pounds/dollar. se yen/dollar Implied exchange rate if PPP holds baht/dollar 20.67 4.00 .67 145.00 pesos/dollar pounds/dollar yen/dollar = Cost of U.S. latte 20.50 * % 42.86 * % 40.30 *% %
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 $3 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. Official exchange Country Thailand Argentina United Kingdom Japan Price 60 baht 15 peso (s) 2 pound(s) 450 yen rate 30 baht/dollar 6 pesos/dollar 0.5 pounds/dollar. se yen/dollar Implied exchange rate if PPP holds baht/dollar 20.67 4.00 .67 145.00 pesos/dollar pounds/dollar yen/dollar = Cost of U.S. latte 20.50 * % 42.86 * % 40.30 *% %
Chapter29: International Finance
Section: Chapter Questions
Problem 8P
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