Q3. Assume the price level in Canada is CAD 16,600, the price level in France is EUR 11,750, and the spot exchange rate is EURCAD 1.35.

A.What is the internal purchasing power of 10,000 CAD? (4 decimal places)

B.What is the internal purchasing power of 10,000 EUR in France? (4 decimal places)

C.If absolute PPP holds, what should the exchange rate be? (4 decimal places)

D.According to Absolute PPP, is the EUR overvalued or undervalued?

E.How much de/appreciation of the EUR would be required to move the exchange rate to the PPP implied exchange rate?