USD price of Big Mac in South Africa and the US are $4.50 and $3.90 respectively. The price of Big Mac in South African Rand is also 37.05. PPP implied exchange rate of South African Rand is 9.50 SAR per dollar. What is the extent of SAR undervaluation or overvaluation (Calculate it in percentages) Hint: You need to find the exchange rate between SAR and USD first from the information given, then find the percent under/over valuation.
A
13.36% Undervaluation
B
15.38% Overvaluation
C
20% overvaluation
D
10% Undervaluation