[solved]Multinational Corporate Finance

Multinational Corporate Finance

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.
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%