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

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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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Milestone

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This is for help on Milestone Two. I have attached the rubric – the teacher grades strictly on the 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. 

Expand upon 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?  ATTACHMENT PREVIEW

 
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The 2008 financial crisis

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The 2008 financial crisis forced financial professionals and economists to reconsider their concepts regarding financial markets and institutions relative to macroeconomic views. Some of the views include adequate governance and the effectiveness of insuring credit risks. This reflection highlighted the liquidity risk arising from bank dependence on securitization for liquidity.

As you read The Impact of the 2007 Liquidity Shock on Bank Jumbo Mortgage Lending, focus on the following risk scenarios:

  • Jumbo loan mortgages
  • Credit risk
  • Securitization
  • Capitalization

Citigroup was a part of the 2008 financial crisis. First conduct research on Citigroup in 2008 and identify the risks they were involved in. Use the taxonomy of risks (Figure 5.1 in the textbook) to analyze and measure the types of risks taken by Citigroup. Based on the risks you identify, make recommendations for how those risks could have been mitigated.

In your research on Citigroup, focus on the following:

  • Risk identification
  • Causes of the risk
  • Risk analysis
  • Risk measurement
  • Recommendation/management of the risk
 
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Milestone

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FIN 336 Milestone One Rubric Specifically address the following questions:  Explain how trade balance, interest rates, and exchange rates are related, and cite an example of how a rise or fall in one changes the others.  Does a deficit in China or the United States change the overall advantage or disadvantage of trade? Why?  Explore how the cost and quantity of imports and exports, such as electronic equipment, may be challenged by the rise and fall of these rates.  Incorporate the fluctuations of supply and demand into the costs incurred and decide ways management calculates estimations for further product needs.  Explain the philosophy of “international crowding out,” citing an example of how this may occur, and describe how excessive borrowing in one country has affected interest rates in the United States. As an example, China and the United States “borrow” from each other to finance needs by purchasing government-backed securities from the other country. This practice provides one country with additional funds and also gives the purchasing country more control over interest rates or “borrowing costs” in the future. How does this influence interest rates in the domestic country and foreign country? Can one country gain control over another financially by continually financing another country’s debt? 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 Relationship Between Trade Balance, Interest Rates, and Exchange Rates Meets “Proficient” criteria and cites examples of each of the main elements and how they are affected Explains how trade balance, interest rates, and exchange rate are related, supported with evidence Explains how trade balance, interest rates, and exchange rate are related; however, examples discussed are incorrect or may have some gaps and misinformation Does not explain how trade balance, interest rates, and exchange rates are related 25 Advantages and Disadvantages of Trade Provides in-depth analysis that demonstrates complete, thorough understanding of trade deficit advantages and disadvantages and cites examples to support the analysis Provides in-depth analysis that demonstrates understanding of trade deficit advantages and disadvantages Provides analysis that demonstrates some minimal understanding of trade deficit advantages and disadvantages, but examples presented are incorrect or may have some gaps and missing information Does not provide analysis demonstrating understanding of trade deficit advantages and disadvantages 25 Imports and Exports Meets “Proficient” criteria, explaining how the rise and fall of imports and exports cost and quantity are influenced by interest rates, with citations to support the explanation Explains how the rise and fall of imports and exports cost and quantity are influenced by interest rates, supported with evidence Explains how the rise and fall of imports and exports cost and quantity are influenced by interest rates; however, information is incorrect or may have some gaps and misinformation Does not correctly apply any of the course concepts in explaining the rise and fall of imports and exports cost and quantity when impacted by interest rates 20 International Crowding Out Meets “Proficient” criteria, explaining the philosophy of “international crowding out” and cites an example of how this may occur, while describing how excessive borrowing in one country has affected U.S. interest rates, with citations to support the explanation. Explains the philosophy of “international crowding out” and cites an example of how this may occur, while describing how excessive borrowing in one country has influenced U.S. interest rates Explains the philosophy of “international crowding out” and cites an example of how this may occur, while describing how excessive borrowing in one country has influenced U.S. interest rates; however, information is not correct or may have some gaps and misinformation Does not explain philosophy of “international crowding out” and does not cite an example of how this may occur, while describing how excessive borrowing in one country has influenced U.S. interest rates 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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