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 SF1.6 million, a one-year period, an initial spot rate of SF1.4700/$, a 5.079% cost of debt, and a 38% 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/$ b. SF1.3900/$ c. SF1.3580/$ d. SF1.5830/$