Caterpillar, Inc., management is trying to decide between selling a new bond issue in the United States or the Eurodollar bond market. In either market, the bonds will be denominated in dollars and will have a three-year maturity. The domestic bonds will have a coupon rate of 4.1 percent and sell at a market price of $1,034.25.

The Eurobonds will have a coupon rate of 4 percent, paid annually, and will sell at $1,029.76. Which bond issue will have the lower cost to the firm?