Conoco-Norway—a subsidiary of Houston-based Conoco—christened the world’s first floating oil-production platform built from concrete, which will also be the world’s largest floating production facility. This innovative concrete platform was designed and built by Aker, the Norwegian engineering group. It cost 25 billion Norwegian crowns (NOK) and is being financed through a mortgage debt instrument at a subsidized rate of 11 percent over a period of seven years.

a. What is the monthly installment owed by Conoco? The standard expression for the amount M to be repaid each year on a one Norwegian crown loan for T years at the interest rate of i_f is:

b. Given that the platform will tap the Heindrum oil field approximately 1,100 km off the coast of Norway, Conoco is considering swapping the NOKdenominated debt into a dollar-denominated debenture to reduce economic exposure. Two options are available: (1) a dollar-denominated mortgage at 81∕8 percent or (2) a dollar-denominated coupon bond at 85∕8 percent. What are the exchange rate scenarios that would warrant either swap? On May 10, 2012, $1 = NOK 6. 24.

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M = -xP if (1+i)T (1+i)-11