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 *% %
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter34: International Finance
Section34.3: Fixed Exchange Rates
Problem 3ST
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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 $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.
Country
Thailand
Argentina
United Kingdom
Japan
Price
60 baht
15 peso (s)
2 pound (s)
450 yen
Official exchange
rate
30 baht/dollar.
6 pesos/dollar
0.5 pounds/dollar
se yen/dollar
Implied exchange rate
if PPP holds
baht/dollar
pesos/dollar
pounds/dollar
yen/dollar
20.67
4.00
.67
145.00
Cost of U.S. latte
*%
20.50
42.86
40.30
%
%
27
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