If the price of an iPhone sold in Australia was AUD1,600 while the price of the same iPhone sold in United States was USD1,300. Applying the theory of the law of one price with current AUD1.32 to one US dollar exchange rate, which of the following is correct?

(5%)

A. The USD was overvalued by 13.58%

B. The USD was undervalued by 13.58%

C. The AUD was undervalued by 6.76%

D. None of the options.

E. The AUD was overvalued by 6.76%