whose currency is Pif. The exchange rate with the U.S. dollar was 2 pifs per dollar in 1980, when the inflation indexes were 100 in the United States and in Paf. Twenty years later, the inflation indexes were 400 in the United States and 200 in Paf, and the exchange rate was 0.9 pifs per dollar. Since then Paf set a fixed exchange rate at this level. (a) In 2000, was Pif undervalued or overvalued according to PPP? (b) Now the pif comes under severe speculative devaluation pressures because of a drop in the official reserves of Paf. The current (annualzed) one-month interest rates are 18% for the pif and 6% for the dollar. I) What type of borrowing lending action could you take to try to take advantage of a devaluation of the pif? II) How much would you stand to lose or gain if Paf is 1)successful in defending its currency? or 2) is devalued to 1 pif per dollar within the whose currency is Pif. The exchange rate with the U.S. dollar was 2 pifs per dollar in 1980, when the inflation indexes were 100 in the United States and in Paf. Twenty years later, the inflation indexes were 400 in the United States and 200 in Paf, and the exchange rate was 0.9 pifs per dollar. Since then Paf set a fixed exchange rate at this level. (a) In 2000, was Pif undervalued or overvalued according to PPP? (b) Now the pif comes under severe speculative devaluation pressures because of a drop in the official reserves of Paf. The current (annualzed) one-month interest rates are 18% for the pif and 6% for the dollar. I) What type of borrowing lending action could you take to try to take advantage of a devaluation of the pif? II) How much would you stand to lose or gain if Paf is 1)successful in defending its currency? or 2) is devalued to 1 pif per dollar within the