On May 11, 1995, 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 (NKr) and is being financed through a mortgage debt instrument at a subsidized rate of 11 % over a period of 7 years.

(a) What is the monthly installment owed by Conoco?

(b) Given that the platform will tap the Heidrum oil field approximately 1,100 km off the coast of Norway, Conoco is considering swapping the NKr denominated debt into a dollar-denominated debenture to reduce its economic exposure. Two options are available:

(a) a dollar-denominated mortgage at 8 1/8%, or

(b) a dollar-denominated coupon bond at 8 5/8%. What are the exchange rate scenarios that would warrant either swap? On May 10, 1995, $1 = NKr6.24.s