quinor'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 operates within the global oil market, it considers the U.S. dollar, rather than the Norwegian krone (Nok), as its functional currency. Ani Karlsen is a currency trader for Equinor and has immediate use of either $3 million (or e 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) US dollar annual interest rate Norwegian krone annual interest rate $ 3,000,000 6.0312 6.0186 5.000 % 4.450 % H he CIA profit potential is, which tells Ari Karlsen he should borrow and invest in the overed interest arbitrage (CIA) profits (Round to four decimal places and select from the drop-down menus.) yielding currency, the ✓, selling the dollars forward 90 days, and therefore earn

quinor'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 operates within the global oil market, it considers the U.S. dollar, rather than the Norwegian krone (Nok), as its functional currency. Ani Karlsen is a currency trader for Equinor and has immediate use of either $3 million (or e 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) US dollar annual interest rate Norwegian krone annual interest rate $ 3,000,000 6.0312 6.0186 5.000 % 4.450 % H he CIA profit potential is, which tells Ari Karlsen he should borrow and invest in the overed interest arbitrage (CIA) profits (Round to four decimal places and select from the drop-down menus.) yielding currency, the ✓, selling the dollars forward 90 days, and therefore earn

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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Tex Hardware sells many of its products overseas. The following are some selected transactions. Tex sold electronic subassemblies to a firm in Denmark for 160,000 Danish kroner (Dkr) on June 6, when the exchange rate was Dkr 1 = $0.1710. Collection was made on July 3 when the rate was Dkr 1 = $0.1713. On July 22, Tex sold copper fittings to a company in London for £36,000 with payment due on September 20. Also, on July 22, Tex entered into a 60-day forward contract to sell £36,000 at a forward rate of £1 = $1.630. The forward contract is not designated as a hedge. The spot rates follow: July 22 £1 = $1.580 September 20 £1 = $1.612 Tex sold storage devices to a Canadian firm for C$75,000 (Canadian dollars) on October 11, with payment due on November 10. On October 11, Tex entered into a 30-day forward contract to sell Canadian dollars at a forward rate of C$1 = $0.730. The forward contract is not designated as a hedge. The spot rates were as follows: October 11 C$1 =…
Please help with question #2. The based country is Trinidad and the countries trading to is Australia, Columbia and Germany. Also explain how can we mitigate foreign exchange risk in these countries. You are asked to simulate your own multinational corporation (MNC).You are required to justify the form of their own MNC, based in the Caribbean, which tradeswith three countries outside of the North America region. Students will then examine issues relatedto foreign exchange management within their multinational corporation.This group assignment should address the following:1. The type of MNC, whether franchising, licensing, the exportation of a product soldthrough a distributor, etc. The rationale behind using this form of MNC should also begiven.2. The main foreign currencies that will be used in the business.3. The foreign exchange exposure of the company and how the company plans to managethis exposure.4. Any current financial issues that affect the operating environment of the MNC…
Please help me with this question: IrishCo, a manufacturing corporation resident in Ireland, distributes products through a U.S. office. Current-year taxable income from such sales in the United States is $12,000,000. IrishCo's U.S. office deposits working capital funds in short-term certificates of deposit with U.S. banks. Current-year interest income from these deposits is $150,000. IrishCo also invests in U.S. securities traded on the New York Stock Exchange. This investing is done by the home office. For the current year, IrishCo has realized capital gains of $300,000 and dividend income of $50,000 from these stock investments. Compute IrishCo's U.S. tax liability, assuming that the U.S.-Ireland income tax treaty reduces withholding on dividends to 15% and on interest to 5%. Assume a 21% U.S. tax rate. IrishCo's U.S. tax liability is $
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.
A U.S.-based multinational company has two subsidiaries, one in Mexico (local currency, Mexicanpeso, MP) and one in Japan (local currency, yen, ¥). Forecasts of business operations indicate the following short-term financing position for each subsidiary (in equivalent U.S. dollars): Mexico:$80 million excess cash to be invested (lent) Japan: $60 million funds to be raised (borrowed) Currency Item US $ MP ¥ Spot exchange rates MP11.60/US$ ¥108.25/US$ Forecast percentage change −3.00% +1.50% Interest rates Nominal Euromarket 4.00% 6.20% 2.00% Domestic 3.75% 5.90% 2.15% Effective Euromarket Domestic Euromarket and the domestic market; then indicate where the funds should be invested and raised.…
Finance The US and Australia operate floating exchange regimes, and they trade with each other. Early this month, the RBA increased the cash rate and, as a result, the AUD is appreciating. Explain in detail why the AUD is appreciating in reaction to higher cash rate. Your explanation must emphasise the actions of US residents and Australian residents in relation financial assets.
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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