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 ($), rather than the Norwegian krone (Nek), as its functional currency. Ari Karlsenis a currency trading strategist for Statoil. Answer the following two independent questions a) and b): 1. Statoil, the national company in Norway, is a large, sophisticated, and active participant in both the currency and petrochemical markets. Although it is a Norwegian company, because it operates within the global oil market, it considers the U.S. dollar ($), rather than the Norwegian krone (Ngk), as its functional currency. Ari Karlsen is a currency trading strategist for Statoil. Answer the following two independent questions a) and b): Spot exchange Rate 3-month forward rate U.S. dollar 3-month interest rate Norwegian Krone 3-month interest rate Nok 6.0312/S Nek 6.0186/S 5% 4.45% Based on the above information, what hedging strategy should Ari advise the CFO that works the best for Statoil? Explain why Ari should choose such hedging strategy. How much U.S. dollar will Statoil receive at the end of 3 months by using this hedging strategy? Question B: Spot exchange rate: U.S. dollar interest rate per annum Japanese Yen interest rate per annum In a daily meeting, the Chief Financial Officer (CFO) gave Ari the table above of market rates and told Ari that the company's financial analyst expected the Japanese Yen to depreciate against the U.S. dollar by 3.46% in 90 days. Assume there are 360 days in a year, and all interest rates are simple interest rates. If the financial analyst's prediction about the US dollar and Japanese Yen turned out to be true: Yen 106/$ 10% 6% 1. What would the spot exchange rate (Yen/$) be in 90 days? 2. Would Ari make a profit by borrowing 1 million US dollar and investing in the money markets? If yes, how much profit would Ari realize in 90 days? If no, explain why?