If the actual exchange rate for the euro value of the British pound is less than the

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If the actual exchange rate for the euro value of the British pound is less than the exchange rate that would satisfy absolute PPP, which of the currencies is overvalued and which is undervalued? Why?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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International Financial Management

ISBN: 978-0132162760

2nd edition

Authors: Geert Bekaert, Robert J. Hodrick

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