If the implied ppp exchange rate using the vl handbag is


1. A NZD put option with an exercise price of USD 0.65/NZD costs USD 0.05. If the current spot rate is USD 0.63/NZD, how much is the time value?

USD 0.07

$0

USD 0.03

USD 0.05

2. The following information was gathered from the April 6, 20X7 WSJ:

Actual exchange rate = MYR 4.85/EUR

If the implied PPP exchange rate using the VL handbag is MYR 4.70/EUR. Calculate the over- or under-valuation of the MYR. [Malaysia ringgit = MYR]

A +3.1915%

B -3.093%

C +3.093%

D -3.1915%

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Financial Management: If the implied ppp exchange rate using the vl handbag is
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