1. Calculate the implied exchange rate between the American burgers and burgers in 5 countries (Swiss Franc (SFR), Sri Lankan Rupee (LKR), Thai Baht (BHT), Turkish Lira (TRY) and Venezuelan Bolivar (VEF)) compare your results with the actual exchange rates shown in the column (2) from Table 1.

2.What currencies were overrated? Which currencies are undervalued? Against the US dollar - in (percent) 3. What are the practical weaknesses and limitations of the Big Mac index? 4. Suppose you buy and sell Big Macs in different currencies. How does this affect the exchange rate?

Note: The first column: The price of burgers in local currency The second column: the actual exchange rate of the US dollar against the local currency

Table 1. Raw data for the Big Mac index as of July 2015 (1) (2) Country Burger price in local currency (LC) Exchange rate (LC/USD) Sri Lanka 350 133.85 Switzerland 6.5 0.95 Thailand 108 34.09 Turkey 10.25 2.65 Venezuela 132 197 United States 4.79 1 Source: The Economist (July 2015). http://www.economist.com/content/big-mac-index