$(10$ pts$)$ A subsidiary in Israel requires the Israel shekel equivalent of $$1$ million at the current exchange rate of $4$ shekels $$,$ or $4$ million shekels. To obtain $4$ million shekels for the subsidiary in Israel, the parent can set up a swap with an Israeli bank. The bank requires a deposit $$1$ million and charges an annual interest of $10\%$ on its loans, while it pay zero interest on its deposits. The parent company can either lend at $15\%$ per year or borrow in the US at $20\%$ per year.

a$.(3$ pts$)$ What is the total cost of setting up a swap with an Israeli bank for the parent company? Include the opportunity cost in your calculations.

b$.(3$ pts$)$ If the shekel is expected to depreciate to $4\mathrm{.}6$ shekels$/$$ by the end of the year. Should the parent company borrow $$1$ million in the US or set up the swap with the Israeli bank?

c$.(4$ pts$)$ At what exchange rate will the parent company will be indifferent between the direct loan in a US bank and the swap?