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1.A Huawei smart phone in China costs CNY6200, while the same Huawei smart phone in Malaysia costs MYR3600. Market exchange rate is MYR0.6056/CNY at the

1.A Huawei smart phone in China costs CNY6200, while the same Huawei smart phone in Malaysia costs MYR3600. Market exchange rate is MYR0.6056/CNY at the time.

a)If purchasing power parity (PPP) holds, what should be the value of the Chinese yuan

(CNY) in ringgit (MYR)?

b)Based on your answer in part (i) above, determine whether the market exchange rate for Chinese yuan (CNY) is undervalued or overvalued. Explain your answer with relevant calculations.

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