In January 2014, a Big Mac sold for $4.62 in US and €3.66 in the Euro Area. The actual exchange rate was 0.74-$1 and the dollar price of the Big Mac in the Euro Area was $4.96. Based on the law of one price, which of the following statements is the most accurate? 2. The exchange rate implied by the PPP (Big Mac Index) equals €0.74-S1 and the Euro is neither overvalued nor undervalued. b. The exchange rate implied by the PPP (Big Mac Index) equals 60.79-$1 and the Euro is overvalued. c. The exchange rate implied by the PPP (Big Mac Index) equals €1.262-$1 and the Euro is overvalued. d. The exchange rate implied by the PPP (Big Mac Index) equals €1.355-$1 and the Euro is undervalued.
