ABC issues 100,000 EUR denominated bonds with 5% coupon interest and 5 years to maturity. The face value of the bond is EUR 1,000, and ABC bonds are sold in the market for EUR 980. The transaction costs are 1.5% of the proceeds from the issue. At the time of the issue EUR risk-free rate is 4% and the EURO is expected to appreciate against USD by 1% per year.

If YTM is 5.47% how would you compute the All in Cost in EUR Terms? Suppose market miss-prices ABC's credit risk by 20 basis points and credit risk in USD and the transaction cost percentage are the same as the EUR transaction cost (transaction cost attributable to EUR and USD AIC are the same = 0.1%, ). How would you compute the estimate of the USD All in Cost? Please explain