20. Answer the following question(s) based on the following information on price

Question

20. Answer the following question(s) based on the following information on prices and exchange rates. Table: Exchange Rates and Prices Country Exchange Rate per Dollar Price of a Computer in Local Currency Brazil (real) 2.2 1200 Mexico (peso) 10 6000 India (rupee) 45 18000 South Africa (rand) 8 3500 Reference: Ref 14-1 (Table: Exchange Rates and Prices) Suppose a computer costs $500 in the United States. With the price of the computer given in the local currency, the Brazilian real is _______ by _____%. A) undervalued; 22 B) undervalued; 12 C) overvalued; 9.1 D) overvalued; 20

Explanation / Answer

Ans.

C Overvalued; 9.1

The price of computer in Brazil is 1200, while on this price the exchange rate should have been 2.4 per $. So, the brazilian currency is overvalued by 9.1%

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