Brief description on the concept of purchasing power parity

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Assignment about purchasing power parity

Big Macs are a relatively homogeneous product in which the recipe is roughly the same throughout the 118 countries in which McDonalds conducts business. As a light -hearted test of purchasing power parity, The Economist began publishing the Big Mac Index. Comparing a country's PPP rate with the market determined exchange rate is a test of whether a country's currency is overvalued or undervalued.

For the purpose of this assignment, choose any 10 countries where McDonald's sells their Big Mac and write a report on the concept of Purchasing Power Parity keeping Big Mac as the base.

Your report should cover the following:

- A brief description on the concept of purchasing power parity including the problems and factors affecting the purchasing power parity.

- Analysis & discussion on the price of Big Mac in local currency against US dollars in 10 selected countries.

- Determine how much a currency of a country is overvalued or undervalued against US dollars after necessary calculations and provide the justification whether PPP holds good for Big Mac.

- Relevant Conclusions.

Attachment:- International Finance.zip

Reference no: EM132283953

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