2. Finance
3. foreign exchange risk and the cost of borrowing swiss francs...

# Question: foreign exchange risk and the cost of borrowing swiss francs...

###### Question details

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 SF1.7 million, a​ one-year period, an initial spot rate of SF1.4900/$, a 4.559% cost of​ debt, and a 34% tax​ rate, what is the effective​ after-tax cost of debt for one year for a U.S.​ dollar-based company if the exchange rate at the end of the period​ was: a. SF1.4900/$

b. SF1.4400/$c. SF1.3970/$

d. SF1.6360/\$