Fundamentals of Financial Management (Concise 6th Edition)

Chapter 17 Multinational Financial Management 549

PANEL A PANEL B

Big Mac

Prices

in Local

Currency

Actual

Dollar

Exchange

Rate, 7/2/07

Big Mac

Prices

in

Dollarsb

Implied

PPP

of

the

Dollar c

Under(#)
Over(")
Valuation
against
the
Dollar, %
United Statesa $3.41 — United Statesa $3.41 — —
Argentina Peso8.25 3.09 Argentina 2.67 2.42 –22
Australia A$3.45 1.17 Australia 2.95 1.01 –14
Brazil Real6.90 1.91 Brazil 3.61 2.02 6
Britain £1.99 2.01d Britain 4.01 1.71d 18
Canada C$3.88 1.05 Canada 3.68 1.14 8
Chile Peso1,565 527 Chile 2.97 459 –13
China Yuan11.0 7.60 China 1.45 3.23 –58
Czech Republic Koruna52.9 21.1 Czech Republic 2.51 15.5 –27
Denmark DKr27.75 5.46 Denmark 5.08 8.14 49
Egypt Pound9.54 5.69 Egypt 1.68 2.80 –51
Euro area €3.06 1.36f Euro area 4.17e 1.12f 22
Hong Kong HK$12.0 7.82 Hong Kong 1.54 3.52 –55
Hungary Forint600 180 Hungary 3.33 176 –2
Iceland Kronur469 61.7 Iceland 7.61 138 123
Indonesia Rupiah15,900 9,015 Indonesia 1.76 4,663 –48
Japan ¥280 122 Japan 2.29 82.1 –33
Malaysia Ringgit5.50 3.43 Malaysia 1.60 1.61 –53
Mexico Peso29.0 10.8 Mexico 2.69 8.50 –21
New Zealand NZ4.60 1.28 New Zealand 3.59 1.35 5
Norway Kroner40.0 5.81 Norway 6.88 11.7 102
Peru NewSol9.50 3.17 Peru 3.00 2.79 –12
Philippines Peso85.0 45.9 Philippines 1.85 24.9 –46
Poland Zloty6.90 2.75 Poland 2.51 2.02 –26
Russia Rouble52.0 25.6 Russia 2.03 15.2 –41
Singapore S$3.95 1.52 Singapore 2.59 1.16 –24
South Africa Rand15.5 6.97 South Africa 2.22 4.55 –35
South Korea Won2,900 923 South Korea 3.14 850 –8
Sweden SKr33.0 6.79 Sweden 4.86 9.68 42
Switzerland SFr6.30 1.21 Switzerland 5.20 1.85 53
Taiwan NT$75.0 32.8 Taiwan 2.29 22.0 –33
Thailand Baht62.0 34.5 Thailand 1.80 18.2 –47
Turkey Lira4.75 1.30 Turkey 3.66 1.39 7
Venezuela Bolivar7,400 2,147 Venezuela 3.45 2,170 1

Notes:
a Average of New York, Chicago, San Francisco, and Atlanta.
b At current exchange rate.
c Purchasing power parity: Local price divided by price in the United States.
d Dollars per pound.
e Weighted average of member countries.
f Dollars per euro.
Sources: McDonald’s; and “Sizzling: The Big Mac Index (Food for Thought about Exchange Rate Controversies),” The Economist, Vol. 384,
July 7, 2007, pp. 74–76.