Foreign exchange risk and the cost of borrowing swiss francs

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Foreign Exchange Risk and the Cost of Borrowing Swiss Francs.

The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.4 ?million, a? one-year period, an initial spot rate of SF1.5200/$, a 4.913% cost of? debt, and a 30?% tax? rate, what is the effective? after-tax cost of debt for one year for a U.S.? dollar-based company if the exchange rate at the end of the period? was:

a. SF1.5200/$

b. SF1.4400?/$

c. SF1.3860?/$

d. SF1.6440?/$

Reference no: EM132291171

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