Question
1. The price of a BigMac in Brazil is 25 reais and in the US is $5.50. The exchange rate between Brazil and the US
1. The price of a BigMac in Brazil is 25 reais and in the US is $5.50. The exchange rate between Brazil and the US is 5.35 = 1 USD.
According to PPP, what percentage overvaluation (positive) or undervaluation (negative) is the Brazilian real?
2.Your best friend wants to buy a house and needs your help figuring out her loan amount. She tells you she can secure a 30-year loan with a fixed rate of 3.825% Based on her income, she can afford a maximum monthly payment of $2,400 (principal & interest) What maximum size loan can she obtain (i.e. what is the loan amount or amount financed)? Round your answer to the nearest dollar.
3.Charlie Brown thinks the SF will decrease against the USD and buys a put option. The premium is $0.0060 and the strike price $0.5950. Each option contract has 62,500 SF. If the ending spot price is $0.5750, compute the net profit (or loss) for 2 contracts.
Please show the work! Thank you
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