Statoil's Arbitrage. Statoil, 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 as its functional currency, not the Norwegian krone. Ari Karlsen is a currency trader for Statoil and has immediate use of either $3 million (or the Norwegian krone equivalent). He is faced with the following market rates and wonders whether he can make some arbitrage profits in the coming 90 days. Calculate his arbitrage profit based on covered interest arbitrage.

Assumptions				Value				Krone Equivalent
Arbitrage funds available				$3,000,000				18,093,600
Spot exchange rate (Nok/$)				6.0312
3-month forward rate (Nok/$)				6.0186
U.S. dollar 3-month interest rate				5.000%
Norwegian krone 3-month interest rate				4.450%

$3,000,000 * 6.0312= 18,093,600 Nok

Invest for 3 months= 18,093,600 Nok (1+4.450%*3/12) =