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Suppose that the price level in Canada is 14,600 CAD, and the price level in Spain is 11,750 EUR, and the spot exchange rate is

Suppose that the price level in Canada is 14,600 CAD, and the price level in Spain is 11,750 EUR, and the spot exchange rate is 1.45 CAD/EUR.

a. What is the implied exchange rate of CAD/EUR that satisfies APPP?

b. Is the euro overvalued or undervalued relative to the Canadian dollar? c. What magnitude of appreciation or depreciation of the euro would be required to return the nominal exchange rate to meet its APPP value?

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