Foreign Exchange Risk and the Cost of Borrowing Swiss Francs

Foreign Exchange Risk and the Cost of Borrowing Swiss Francs. The chapter demonstrated that a firm borrowing in a foreign currency could potentially end up paying a very different effective rate of interest than what it expected. Using the same baseline values of a debt principal of SF1.7 million, a one-year period, an initial spot rate of SF1.4700/$, a 5.202% cost of debt, and a 30% tax rate, what is the effective after-tax cost of debt for one year for a U.S. dollar-based company if the exchange rate at the end of the period was: a. SF1.4700/5 b. SF1.3900/S C. SF1.3360/5 d. SF 1.5620/S