6.15 Statoil of Norway'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, rather than the Norwegian krone, as its functional currency. Ari Karlsen is a currency trader for Statoil and has immediate use of either $3 million (or the Norwegian krone equivalent). He is faced with the following market rates and wonders whether he can make some arbitrage profits in the coming 90 days. Arbitrage funds available Spot exchange rate (Nok/$) 3-month forward rate (Nok/$) U.S. dollar 3-month interest rate Norwegian krone 3-month interest rate $3,000,000 6.0312 6.0186 5.000% 4.450%

6.15 Statoil of Norway'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, rather than the Norwegian krone, as its functional currency. Ari Karlsen is a currency trader for Statoil and has immediate use of either $3 million (or the Norwegian krone equivalent). He is faced with the following market rates and wonders whether he can make some arbitrage profits in the coming 90 days. Arbitrage funds available Spot exchange rate (Nok/$) 3-month forward rate (Nok/$) U.S. dollar 3-month interest rate Norwegian krone 3-month interest rate $3,000,000 6.0312 6.0186 5.000% 4.450%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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 and wonders whether he can make some arbitrage profits in the coming 90 days. Abitrage funds available Spot exchange rate (Nok = $1.00) 3-month forward rate (Nok = $1.00) U.S. dollar annual interest rate Norwegian krone annual interest rate S 3,000,000 6.0312 6.0186 5.000% 4.450 % SIE The CIA profit potential is %, which tells Ari Karlsen he should borrow and invest in the covered interest arbitrage (CIA) profits. (Round to four decimal places and select from the…
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I want the answer for question b) ( I have attached the image of the question as well ) Statoil, the national company in Norway, is a large, sophisticated, and active participant in both the currency and petrochemical markets. Although it is a Norwegian company, because it operates within the global oil market, it considers the U.S. dollar ($), rather than the Norwegian krone (Nok), as its functional currency. Ari Karlsen is a currency trading strategist for Statoil. Answer the following two independent questions a) and b): a) Statoil sold 1 million barrels of crude oil to the Norwegianpetrol station chain, Circle K, today for 120 Nok per barrel (Nok denotes the Norwegian Krone). Statoil expects to receive the full payments from Circle K in 3 months’ time when the crude oil is delivered to Circle K’s facilities in Norway. Statoil is informed that Circle K will pay for the oil in Norwegian Krone. Ari is asked by the Chief Financial Officer (CFO) about the strategy to reduce the…
2. Assume that a FARFAR subsidiary of the U.S. MNC operates in a highly inflationary economy and keeps its balance sheet in FFAD currency. The U.S. dollar is the reporting currency of the U.S. MNC. The following table presents the balance sheet in FAAD. The subsidiary is at the end of its first year of operation. The historical exchange rate is FAAD1.60/$1.00 and the most recent exchange rate is FAAD2.00/$1.00 while the weighted average exchange rate is FAAD1.80/$1.00. The current price index is 105 at the acquisition date while the price index is 175 at the end of the reporting period. Fill out the missing entries for this FARFAR subsidiary under FASB52 of the GAAP and IAS 29 of the IFRS. (Hint: Inventory is carried at the current value on the book) Balance Sheet 1Cash Inventory (current Value = FAAD1,800) 3Net fixed assets 2 4Total Assets 5Current liabilities 6Long-term debt 7Common stock 8Retained earnings 9Total L&E Local Currency FFAD 2,100 FAAD 1,500 FAAD 3,000 FAAD 6,600 FAAD…
15.7A
Singapore through Pacific Oil imports tons of crude petroleum from neighbouring country Malaysia annually to manage the high consumption demand in the country and abroad. However, top management in Pacific Oil is not comfortable with the idea of using derivatives as a way to manage the transaction exposure. (i) Theoretically, why do the top management in Pacific Oil are not in favour in using derivative to manage the transaction exposure? (ii) Describe other strategies to manage the transaction exposure.
4
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Which of the following statements about the foreign exchange market is NOT true? The client market, also referred to as the retail market, is a segment of the FX market. FX brokers match buy and sell orders and carry a large inventory of foreign exchange. Nonbank dealers represent approximately 40% of the market. About 100-200 banks worldwide are prepared to make a market in foreign exchange.

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