10. Siemens can borrow euros at 12% or pesos at 80% for one year. The peso:euro exchange rate is expected to move from €1 = Ps3300 currently to €1 = Ps4500 by year’s end.

(a) What is the expected after-tax euro cost of borrowing euros for one year if the Mexican corporate tax rate is 53%?

(b) What is Siemens’ expected after-tax euro cost of borrowing pesos for one year?

(c) At what end-of-year exchange rate will the after-tax peso cost of borrowing euros equal the after-tax peso cost of borrowing pesos?