(a) How large would transaction costs in the forward market have to be to eliminate the cost advantage of GBP debt relative to EUR debt? Think about transaction costs in percentage terms. For example, if the EUR/GBP forward rate is 1.60 (calculated using the interest rates in Exhibit 8), then bid and ask prices of 1.584 and 1.616 would represent round-trip transaction costs of 2% (the bid and ask prices are 1% lower and 1% higher than the calculated rate). Assume transaction costs are the same, in percentage terms, at all maturities. Ignore transaction costs in the spot market for the purposes of this exercise. This question is a perfect opportunity to use Solver in Excel. (If you know how to use it, then use it. If not, learn how to use it, then use it!) (a) How large would transaction costs in the forward market have to be to eliminate the cost advantage of GBP debt relative to EUR debt? Think about transaction costs in percentage terms. For example, if the EUR/GBP forward rate is 1.60 (calculated using the interest rates in Exhibit 8), then bid and ask prices of 1.584 and 1.616 would represent round-trip transaction costs of 2% (the bid and ask prices are 1% lower and 1% higher than the calculated rate). Assume transaction costs are the same, in percentage terms, at all maturities. Ignore transaction costs in the spot market for the purposes of this exercise. This question is a perfect opportunity to use Solver in Excel. (If you know how to use it, then use it. If not, learn how to use it, then use it!)