Comparing the actual exchange rate to the ppp implied, Financial Management

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Comparing the actual exchange rate to the ppp implied

Asume Purchasing power parity holds, Mcdonald’s Big Mac Price is 3.68 in New Yock and GBP 2.63 in London. The actual spot rate in GBP 0.764 $1. Comparing the actual exchange rate to the PPP implied exchange rate, how much is GBP under or overvale?

A. Implied PPP rate shows the actual rate of GBP is 6.9% under-valued

B. Implied PPP rate shows the actual rate of GBP is 6.9% Over-valued

C. Implied PPP rate shows the actual rate of GBP is 6.45% under-valued

D. Implied PPP rate shows the actual rate of GBP is 6.45% Over-valued

E. Non of the Above

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