1.) Go to The Economist’s Website, located at http://www.economist.com/content/big-mac-index, and explore the Big Mac Index. Focus on what it tells you about PPP and the relative prices between Thailand and the U.S. in particular.
—–Determine whether or not the Big Mac Index supports the theory of PPP. Analyze the essential manner in which the IFE is reflected in the different prices on The Big Mac Index from country to country. Elaborate on the correlations between inflation and index prices, and the correlations between personal incomes and prices.
- 2.) Select a Fortune 500 company that is of interest to you. Use the Internet and the following links to research the manner in which translation exposure could affect the company in question.
- Yahoo! Finance, located at http://finance.yahoo.com/
- X-Rates, located at http://www.x-rates.com/table/?from=thb
- CoinMill.com, located at http://coinmill.com/THB_USD.html
- “Industry Analysis: Recreation” article, located at http://www.valueline.com/Stocks/Industries/Industry_Analysis__Recreation.aspx
——–Focus on the location of most of the company’s foreign subsidiaries and the major currencies that the company must use on a daily basis. Consider the key tools that are available for the selected company to minimize translation exposure when the company repatriates earnings at the end of the fiscal year. Be prepared to discuss.
3.) What does the PPP theory tell us about the Thai Baht class? Is it overvalued/undervalued? Why?
