Problem no 1

Cars and Bitcoin Assume you own a store selling cars for a large, international car manufacturer. For every car sold, you must pay the car manufacturer 0.95 million Norwegian kroner. NOK denotes Norwegian kroner, and mNOK millions of Norwegian kroner. The sales price of a car is fixed at 1 mNOK. There is a delay between when a customer agrees to buy a car and when the car is delivered and the customer makes the payment for the car. The car manufacturer has decided that customers may pay for the cars using Bitcoin (BTC). Assume that all customers choose to pay in BTC. When you sell a car, you will use the current NOK/BTC exchange rate to fix the amount to be paid in BTC. At delivery of the car, you receive funds in BTC from the customer, and immediately exchange these for NOK at the prevailing exchange rates. This implies that your company is exposed to some currency risk in the time period between the contract is signed and the payment is made. No financial instruments are available to offset this risk. In this home exam, we will use historical data to measure profits over time. Ignore taxes, interest rates and other cost/income related variables except those explicitly asked for in the questions