One year ago the spot exchange rate between the Chilean peso and the U.S. dollar was Ps600.00/$. During the past year, the Chilean peso fell 35% in value against the dollar. During this same 12-month period, prices in the U.S. were stable but Chilean prices rose 24%.
A) What is the actual exchange rate today?
B) What should be the exchange rate today, based on purchasing power parity and assuming the initial year was "normal"?
C) By what percentage is the Chilean peso over or under valued today?