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