(7 pts) XYZ can issue 4-year bonds in either US dollars or Euros. US dollar denominate bonds would have a coupon rate of 6% if issued at par value. Euro denominated bonds would have a coupon rate of 4% if issued at par value. Assume that XYZ can issue bonds worth $10 million in either currency. Also assume the current exchange rate is $1.25/1EUR and that the forecasted exchange rate of the Euro in each of the next four years is listed below. 8) #of USS/ 1 Euro $1.25 $1.23 $126 $1.28 $1.31 What is the expected annual cost of issuing the 4 year Euro denominated bonds to the US company according to their 4 year forecast? Expected Cost (as a % rate) of 4-yr Euro Bonds '- -- What would be the expected return to a European investor who purchased XYZ's Eurobonds? Expected return to a European investor Which type of bonds should XYZ issue if their forecast is correct? EuroBonds or US Bonds