A bottle of Dom Perignon is selling for 550FF in Paris and the exchange rate is $.167/FF. The champagne is selling for $95 on average in the U.S. exclusive of transportation cost. The price in the U.S. is:

Question

Quizplus · Accepted Answer

Converting the price in Paris to dollars: 550FF x $0.167/FF = $91.85. Compared to the average price in the U.S. of $95, the price in Paris is $3.15 cheaper. Therefore, the champagne in the U.S. is overvalued by $3.15.

A Bottle of Dom Perignon Is Selling for 550FF in Paris