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FIN 336 Milestone Two Rubric The law of one price and purchasing power parity e

FIN 336 Milestone Two Rubric The law of one price and purchasing power parity ensure that even though exchange rates may fluctuate, a consumer will pay the same price for an item or basket of goods no matter which currency is used in a particular country. At times, an individual or business will take advantage of exchange rates to gain more value or wealth from international trade; this is called arbitrage.  Write a paper expanding the explanation of these two theories, utilizing and comparing goods purchased in China with yuan and those same goods purchased in the United States with dollars. Incorporate research to fully describe purchasing power parity and the law of one price.  Provide an example and explanation of how the possibility of arbitrage may be related to both of these concepts.  Explain the differences between covered interest arbitrage, intermarket arbitrage, and triangular arbitrage, and how the cycle of investments and cross rates played a part.  What is your opinion of this type of arbitrage as it relates to foreign exchange—is this unethical behavior or merely an investment strategy? Requirements of Submission: This milestone must follow these formatting guidelines: double spacing, 12-point Times New Roman font, one-inch margins, and discipline-appropriate citations. This paper should be a minimum of 2 pages in length in addition to the title and reference pages. The APA style format must be used when citing and referencing information provided. Provide your name, course number, a title to the paper, and headers and footers where applicable. This activity uses an integrated rubric in Blackboard. Students can view instructor feedback in the Grade Center. For more information, review these instructions. Instructor Feedback: Students can find their feedback in the Grade Center as an attachment. Critical Elements Exemplary (100%) Proficient (85%) Needs Improvement (55%) Not Evident (0%) Value Purchasing Power Parity and Law of One Price Meets “Proficient” criteria with research and explanation that fully describes purchasing power parity and the law of one price with citations and evidence to support the explanation Research describes and explains purchasing power parity and law of one price with supporting evidence Research describes and explains purchasing power parity and law of one price; however, research discussed is incorrect or may have some gaps and misinformation Research does not describe and explain purchasing power parity and law of one price 25 Arbitrage Relationship With Purchasing Power Parity and Law of One Price Provides in-depth explanation with an example of how arbitrage may be related to purchasing power parity and law of one price Provides explanation with an example of how arbitrage may be related to purchasing power parity and law of one price Provides explanation with an example of how arbitrage may be related to purchasing power parity and law of one price; however, example and explanation may have some gaps and misinformation Does not explain with an example how arbitrage may be related to purchasing power parity and law of one price 25 Differences Between Covered Interest Arbitrage, Intermarket Arbitrage, and Triangular Arbitrage Meets “Proficient” criteria, explaining the differences between covered interest arbitrage, intermarket arbitrage, and triangular arbitrage with supporting citations Explains most of the differences between covered interest arbitrage, intermarket arbitrage, and triangular arbitrage with supporting evidence Explains most of the differences between covered interest arbitrage, intermarket arbitrage, and triangular arbitrage; however, the explanation may have some gaps and misinformation Does not explain the differences between covered interest arbitrage, intermarket arbitrage, and triangular arbitrage 20 Arbitrage as It Relates to Foreign Exchange Provides in-depth opinion of arbitrage as it relates to foreign exchange, expressing whether the behavior is unethical or merely an investment strategy, with citations supporting the opinion Provides informed opinion of arbitrage as it relates to foreign exchange, expressing whether the behavior is unethical or merely an investment strategy, with supporting evidence Provides opinion of arbitrage as it relates to foreign exchange, expressing whether the behavior is unethical or merely an investment strategy; however, the opinion may have some gaps and misinformation Does not provide logical opinion of arbitrage as it relates to foreign exchange expressing whether the behavior is unethical or merely an investment strategy 20 Writing (Mechanics/Citations) No errors related to organization, grammar and style, and citations Minor errors related to organization, grammar and style, and citations Some errors related to organization, grammar and style, and citations Major errors related to organization, grammar and style, and citations 10 Earned Total 100%

 
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