Question
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
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.
Question content area bottom
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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