Abstract
This document presents practical cases about international finance (exchange rates and international trade, profits and arbitrage etc.). Extract: "The Purchasing Power Parity is an economic technique that we can use when we want to determine the relative values of two currencies. It is useful because generally the amount of goods that can be bought with a currency varies drastically between different nations, based on availability of goods, demand for the goods, and a number of other, difficult to determine factors. Purchasing Power Parity solves this problem by taking some international measure and determining the cost for that measure in each of the two currencies, then comparing that amount. Perhaps the most famous example of Purchasing Power Parity was given by the Economist Magazine as the Big Mac index. The Big Mac is in fact the most similar product across different countries. That is why this measure became important according to analysts. It is also that Mc Donald's pricing strategy is very well established. Using the Big Mac index, we determine the cost of a Big Mac in a number of countries and can then conclude an exchange rate based on this index."
