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this is all the information that was given, review carefully Question 7 (8 marks) The value of Brazilian Real (BRL) has fallen by 38.4% in

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this is all the information that was given, review carefully

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Question 7 (8 marks) The value of Brazilian Real (BRL) has fallen by 38.4% in the 5-year period from July 20, 2015. Spot exchange rate was BRL 1 = USD 0.1876 on July 20, 2020 from BRL 1 = USD 0.3045 on July 20, 2015. During the 5-year period, average annual inflation rate in Brazil was 5.72% while that in the United States was 1.82%. 7A. What should have been the exchange rate (USD / BRL) on July 20, 2020 if PPP held? (7A. 4 marks) 7B. Actual exchange rate at July 20, 2020 was BRL 1 = USD 0.1876. By what percentage was BRL undervalued or overvalued compared to that estimated by PPP? (7B. 4 marks)

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