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.....................$3,000,000

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%