1. This question deals with PPP and exchange rates conversions. Define the market exchange rate as the foreign currency price for 1 US Dollar e.g. 1 USD=1.27 CAD (Canadian Dollar). (a) Find the exchange rates for various countries listed below. You can use websites such as Yahoo Currency Converter to aid you in your answers. Country Currency Exch Rate Price of BM (XR) in local currency USA USD 1 4.93 China Yuan 22.4 France Euro 4.25 Mexico Peso 54 India Rupees 190 Vietnam VND 60000 BM exch rate (BMXR) 1
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Using the following information, determine each one of the theoretical Exchange Rates (ER) for December of year 02 according to the Relative PPP Theory: MARKET MARKET ER ER COUNTRY CURRENCY CPI CPI Dec-01 Dec-02 Dec-01 Dec-02 Mexico MXP 231.89 264.3546 19.56 20.15 Turkey TRY (Lira) 498 527.88 5.9419 6.07673 Australia AUD 989 1038.45 1.7759 1.81183 Japan JPY 678 745.8 105.866 113.978 United Kingdom GBP 905.26 986.7334 0.5991 0.617849 South Korea KRW (Won) 795.4 874.94 1,658.62 1,793.37 Canada CAD 523.12 554.5072 1.3736 USA USD 1.5 1.56
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