Question: 5-2 please answer a and b Argentine Float. The Argentine poso was fixed through a currency board at Ps1.00/5 throughout the 1990s in January 2002,

5-2 please answer a and b 5-2 please answer a and b Argentine Float. The Argentine poso was

Argentine Float. The Argentine poso was fixed through a currency board at Ps1.00/5 throughout the 1990s in January 2002, the Argentine peso was fioated. On January 29, 2003, it was trading at Ps3 17/5. During that one-yoar period, Argentina's inflation rate was 20% on an annualized basis. Inflation in the United States during that same period was 24% annualized. a. What should have been the exchange rate in January 2003 it PPP hold? b. By what percentage was the Argentine peso undervalued on an annualized basis? c. What were the probable causes of undervaluation? a. What should have been the exchange rate in January 2003 if PPP held? The exchange rate in January 2003, if PPP held, should have been Pi 5. (Round to five decimal places.)

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