Equinor's Corporate Arbitrage.Equinor, the national oil company of Norway, is a large, sophisticated, and active participant in both the currency and petrochemical markets. Although it is a Norwegian company, because it operates within the global oil market, it considers the U.S. dollar, rather than the Norwegian krone (Nok), as its functional currency. Ari Karlsen is a currency trader for Equinor and has immediate use of either

$3

million (or the Norwegian krone equivalent). He is faced with the following market rates,

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, and wonders whether he can make some arbitrage profits in the coming 90 days.

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Part 1

The CIA profit potential is

enter your response here%,

which tells Ari Karlsen he should borrow

Norwegian krones

U.S. dollars

and invest in the

higher

lower

yielding currency, the

Norwegian krone

U.S. dollar

, selling the dollars forward 90 days, and therefore earn covered interest arbitrage (CIA) profits.(Round to four decimal places and select from the drop-down menus.)

Part 2

The CIA profit amount is

$enter your response here.

(Round to the nearest cent.)

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Data table

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in order to copy its contents into a spreadsheet.)

Arbitrage funds available	$3,000,000
Spot exchange rate (Nok=$1.00)	6.0318
3-month forward rate (Nok=$1.00)	6.0184
U.S. dollar 3-month interest rate	5.001%
Norwegian krone 3-month interest rate	4.448%

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