Hi,

Could you please help me with the three questions below? I need the correct answer, and if possible, a brief explanation. Thanks very much :))

1.If the currency exchange rate is 109 Japanese yen per U.S. dollar, the price of a Bic Mac hamburger in the United States is $3.57 and the price of a Big Mac hamburger in Japan is 295 yen, then other things equal, the Big Mack hamburger in Japan is ________.

a)correctly priced

b)under-priced

c)over-priced

2.Which of the following is true regarding the market for foreign exchange?

Select one:

a)The rate of exchange is determent by the Central Banks of the two countries

b)It provides the physical and Institutional structure though which only spot trading can be undertaken.

c)The market provides the physical and institutional structure though which the money of one country is exchanged for another.

3.We would generally expect covered interest rate parity to exist in markets, but when we have covered interest arbitrage___________.

Select one:

a)the market must be OUT OF equilibrium.

b)a "risky" arbitrage opportunity exists.

c)the market must be IN equilibrium.

d)the arbitrager trades only in the spot currency exchange market