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Current exchange rate the peso

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Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar is 8.50 according to the Big Mac Index. Further, assume the current exchange rate is Peso 7.50/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is:

a. undervalued
b. overvalued.
c. correctly valued.
d. There is not enough information to answer this question.

Reference no: EM131387995

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