Spot: NOK 8.0000/USD   Forward: NOK 8.2000/USD   12-month USD Libor: +2.00%   12-month NOK Libor: +8.00%   WACC: 10.00%   Call option: strike price USD 0.125/NOK, premium USD 0.0025/NOK   Put option: strike price USD 0.125/NOK, premium USD 0.0035/NOK   Compute the profits from the Covered interest rate arbitrage. You can borrow USD 1M or NOK 8M. Compute the final profits in USD and round to the nearest dollar. USE THE TWO LIBOR RATES.

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.