Question: 2 0 0 3 , it was trading at Ps 3 . 2 4 - $ 1 . 0 0 During that one year period,

2003, it was trading at Ps3.24- $1.00 During that one year period, Argentrni' inflation rate was 20% un an annualized basis. Inflation in the United States during that same period was 23% annualized
a. What should have been the exchange rate in January 2003 if PPP held?
b. By-ahai percentege was tite Argernine pesa undervalued on an annualized bask?
c. What were the probable causas of undervaluation?
a. What should have been the exchange rate in January 2003 it PPP held?
The exchange fate in January 2003, if PPP held, should have beeri Ps
$.(Roind to five dncimal places.)
2003, it was trading at Ps3.24- $1.00 During that one year

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