The document discusses purchasing power parity (PPP) as an economic theory and method for determining the value of currencies relative to one another. It explains the functions of PPP exchange rates, including their consistency over time and their trend correlation with actual exchange rates. Additionally, it distinguishes between absolute and relative parity and outlines the concepts of direct and indirect quotations in currency exchange.

1. Topic :Purchasing Power Parity and
Quotation
Presented By
Iftekar Uddin Al Mahmud
ID 1415015
MBA 15

2. Purchasing power parity (PPP) is a component
of some economic theories and is a technique
used to determine the relative value of different
currencies.
Purchasing power indicate is the capacity of the
money for the quantity of commodity that
money can purchase .

3. Prof Bostel Casel
To determine the exchange rate between
currency under this theory the exchange
rate indicate the power of 1 currency
which is equal to the of other currency. In
this theory gold is replace by a parity
commodity which is produce and
consume equally between the countries
like 1 kg of rice in BD is tk 50 In India the
same quantity of price with same fitness
rp 35.

4.  The purchasing power parity exchange rate
serves two main functions:
 PPP exchange rates can be useful for making
compare between countries because they stay
fairly constant from day to day or week to week
and only change modestly, if at all, from year to
year.
 Second, over a period of years, exchange rates do
tend to move in the general direction of the PPP
exchange rate and there is some value to
knowing in which direction the exchange rate is
more likely to shift over the long run.

5.  Absolute Parity
Absolute Parity is the indicate the price of
commodity at different countries will be equal
if the measure by same currency.
 Relative Parity
Relative Parity refers to the adjustment of
transaction cost, adjusting cost and donation
cost.

6.  Direct Quotation
Direct Quotation represent the value of a
foreign currency in terms of the home currency
(e.g. £ or euro)
 Indirect Quotation
Indirect Quotation represent the number of
units of a foreign currency per unit of home
currency.

7.  Floated Currency
Floated Currency is variable cost which is the
fixed cost. Suppose tk 1 =$ 0.01100.
DQ = 1/IQ IQ = 1/DQ
=1/ 0.01100 = 1/90.90
=90.90 tk =$ 0.01100