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From the Big Mac Index: A Big Mac is selling on average for $3.06 in...

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Finance

  1. From the Big Mac Index: A Big Mac is selling on average for $3.06 in the USA and on average for EUR2.92 in European member countries. If the actual exchange rate is 1.22 USD/EUR, then, relative to its purchasing power parity, the Euro is trading at an FX rate that is:

    a. undervalued by about 14%

    b. undervalued by about 22%

    c. overvalued by about 14%

    d. overvalued by about 16%

  1. Which statement about futures and forwards below is incorrect?

    a. Futures trade on the Exchange and forwards trade on the OTC market

    b. Futures are standardized and traded through a clearinghouse, forwards are not

    c. Futures and forwards are the same, they are called forwards in Europe, and futures in the US

    d. They both represent a current exchange rate for delivery of a currency at a future date

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