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    International Finance Unit Assessment

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    Question 1. Compare and contrast the following: the law of one price, absolute purchasing power parity, and relative purchasing power parity?
    Question 2. Compare and contrast the real effective exchange rate index and the normal effective exchange rate index?
    Question 3. Analyze and propose the major differences of American and European denominations?
    Question 4. Compare and contrast the following: foreign exchange market, foreign exchange transaction, and foreign exchange?

    Each question mus be at least 200 words with references and the book that I'm using is Fundamentals of Multinational Finance by Moffett, Stonehill, & Eiteman.

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    https://brainmass.com/business/foreign-exchange-rates/international-finance-unit-assessment-609825

    Solution Preview

    The response addressed the query is posted in 1093 words with APA References

    // The purchase price parity is very important concept of economics which is used in analysis of inflation and currency exchange rates. In this context, in the following section, the law of one price, absolute purchasing power parity, and relative purchasing power parity has been discussed. Further the concept of nominal and real interest rate has also been taken up for discussion.//

    Compare and Contrast: The law of one price, absolute purchasing power parity, and relative purchasing power parity

    The law of one price, absolute purchasing power parity, and relative purchasing power parity are the concepts of economics that are used in analyzing the inflation or in precise terms, the currency's buying power. The low of one price states that the price of a commodity must be the same in the all the geographical locations. If the law of one price holds true, then there exists absolute purchase price parity. The absolute purchase price parity is based on the premise that the price of goods, which are similar, must be the same in two different geographical locations. The concept of absolute purchase price parity is different from relative purchase price parity. The relative purchase price parity is deemed to be prevailing when the ratio of change, in two different price indexes, remains constant. A change in prices takes place in case of relative purchase price parity, but the ratio of that change remains the same whereas in case of absolute purchase price parity, the price of commodities remains the same in two different geographical locations (Rødseth, 2000).

    Compare and Contrast: The real effective exchange rate index and the normal effective exchange rate index

    The nominal and real effective exchange rate indexes are used by the analysts in ...

    Solution Summary

    The expert compares and contrasts the law of one price, absolute purchasing power parity, and relative purchasing power parity. The purpose of the major differences of American and European denominations are analyzed. The response addressed the query is posted in 1093 words with APA References.

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