Suppose that you travel to Cali (Colombia), where the exchange rate is 1 USD to 2,900 Colombian

Question:

Suppose that you travel to Cali (Colombia), where the exchange rate is 1 USD to 2,900 Colombian pesos. As you enter a McDonald’s restaurant, you realize you need 17,400 Colombian pesos to buy a Big Mac. Assuming a Big Mac sells for $5 in the United States, would you say that the Colombian peso is over- or undervalued in terms of PPP?

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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