Country Local Price Dollar Exchange Rate Dollar Price Dollar PPP

United States 5.28 1.0 $ 5.28 1.0

Argentina 75 15.0 $ 5.00 14.2
Australia 5.9 1.3 $ 4.71 1.1
Brazil 16.5 5.4 $ 3.06 3.1
Britain 3.19 0.7 $ 4.41 0.6
Canada 6.55 1.2 $ 5.26 1.2
Chile 2600 802.8 $ 3.24 492.4
China 20.4 6.4 $ 3.17 3.9
Colombia 10900 3783.2 $ 2.88 2064.4
Costa Rica 2290 613.9 $ 3.73 433.7
Czech Republic 79 21.8 $ 3.62 15.0
Denmark 30 6.1 $ 4.93 5.7
Egypt 34.21 17.7 $ 1.93 6.5
Euro area 3.95 0.8 $ 4.84 0.7
Hong Kong 20.5 7.8 $ 2.62 3.9
Hungary 864 252.1 $ 3.43 163.6
India 180 63.9 $ 2.82 34.1
Indonesia 35750 13359.0 $ 2.68 6770.8
Israel 16.5 3.4 $ 4.80 3.1
Japan 380 110.7 $ 3.43 72.0
Latvia 2.7 0.8 $ 3.31 0.5
Lithuania 2.8 0.8 $ 3.43 0.5
Malaysia 9 4.0 $ 2.28 1.7
Mexico 48 18.7 $ 2.57 9.1
New Zealand 6.2 1.4 $ 4.51 1.2
Norway 49 7.9 $ 6.24 9.3
Pakistan 375 110.5 $ 3.39 71.0
Peru 10.5 3.2 $ 3.27 2.0
Philippines 134 50.7 $ 2.64 25.4
Poland 10.1 3.4 $ 2.97 1.9
Russia 130 56.7 $ 2.29 24.6
Saudi Arabia 12 3.8 $ 3.20 2.3
Singapore 5.8 1.3 $ 4.39 1.1
South Africa 30 12.3 $ 2.45 5.7
South Korea 4400 1069.3 $ 4.12 833.3
Sri Lanka 580 153.8 $ 3.77 109.8
Sweden 49.1 8.0 $ 6.12 9.3
Switzerland 6.5 1.0 $ 6.76 1.2
Taiwan 69 29.6 $ 2.33 13.1
Thailand 119 32.0 $ 3.72 22.5
Turkey 10.75 3.8 $ 2.83 2.0
UAE 14 3.7 $ 3.81 2.7
Ukraine 47 28.7 $ 1.64 8.9
Uruguay 140 28.6 $ 4.90 26.5
Vietnam 65000 22711.5 $ 2.86 12310.6
Austria 3.4 0.8 $ 4.16 0.6
Belgium 4.1 0.8 $ 5.02 0.8
Estonia 3.15 0.8 $ 3.86 0.6
Finland 4.56 0.8 $ 5.58 0.9
France 4.2 0.8 $ 5.14 0.8
Germany 3.9 0.8 $ 4.77 0.7
Greece 3.35 0.8 $ 4.10 0.6
Ireland 4.07 0.8 $ 4.98 0.8
Italy 4.2 0.8 $ 5.14 0.8
Netherlands 3.71 0.8 $ 4.54 0.7
Portugal 3.2 0.8 $ 3.92 0.6
Spain 3.95 0.8 $ 4.84 0.7
Over/Under Valuation
0.0 Purchasing Power Parity (PPP) can be
-5.30% determined by comparing the prices of
identical products in different currencies.
-10.87%
-42.13% Example:
-16.42% The PPP theory predicts that the Euro/US
dollar exchange rate should be equivalent
-0.43% to:
-38.66% E€/$= P€/P$
-39.93%
Thus, if a Big Mac costs $4.80 in US and
-45.43% €3.68 in Europe, PPP theory predicts that
-29.35% the dollar/euro exchange rate should be
-31.40% 3.68/4.80=0.77.
-6.59% In our example here it is .74, that means
-63.39% US dollar overvalued 3.3% againts Euro.
-8.41%
-50.34%
-35.10% Questions:
-46.62%
1. Identify the countries in which the Big Mac is most and least expensive? Cite at least th
-49.32% Most Expensive Least Expensive
-9.06% a. Switzerland a. Ukraine
-35.00% b. Norway b. Egypt
c. Sweden c. Taiwan
-37.40%
-35.08%
-56.89%
-51.29%
-14.58%
2. Identify the countries in which the US dollar is over evaluated and under evaluated? Ci
18.22% each and indicate the percentage.
-35.73% Over Evaluated Under Evaluated
-38.09% a. Thailand (-29.46%) a. Hong Kong (-50.34%)
b. Sweden (15.97 %) b. Indonesia (-49.32%)
-49.97% c. Norway (18.22%) c. India (-46.62%)
-43.83%
-56.61%
-39.40% 3. Imagine you would like to do business in some of the countries from your answer to q
-16.94% valuation tell you about doing business there and the currency risk? (expected to be abou
-53.65% length)
-22.06% In most of the countries that I have listed the dollar currency is overvalued so when tryin
-28.58% countries I need to understand that my currency is worth more and I must consider that w
intend to sell. The same can be said in countries where the dollar currency is under evalu
15.97% consider possibly raising my price levels to make a profit based on the goods or currency
28.12% is important to focus on the PPP as it describes the "power distance" (for lack of better te
-55.78% currency. This information could be used to determain how your goods and services will
-29.46%
-46.46%
-27.81%
-69.00%
-7.22%
-45.80%
-21.17%
-4.94%
-26.96%
5.73%
-2.62%
-9.57%
-22.33%
-5.63%
-2.62%
-13.98%
-25.80%
-8.41%
d least expensive? Cite at least three countries for each.

aluated and under evaluated? Cite at least three countries for

countries from your answer to question 2 above. What does the

rrency risk? (expected to be about a paragraph response in

ency is overvalued so when trying to do business in these

h more and I must consider that when pricing the goods that I
he dollar currency is under evaluated because I would have to
based on the goods or currency that I am trying to purchase. It
er distance" (for lack of better terms) of the different values in
ow your goods and services will fare in international markets.