- In Excel show the cash flows in association with borrowing with each currency (Swiss Franc, British Pound, etc.)

-Calculate the forward exchange rates for each currency with respect to the euro using the interest rate parity conditions

-Convert the cash flows associated with borrowing in each bond into euros using the forward rates and calculate the resulting yield (internal rate of return of the cash flows). Which issue provides the lowest cost of borrowing?

Cross exchange rates (Spot prices) 7/31/02 Quoted as Row currency/Column currency Euro UK SF US$ Euro 1.000 1.593 0.688 1.020 UK 0.628 1.000 0.432 0.640 SF 1.453 2.315 1.000 1.482 US$ 0.980 1.562 0.675 1.000Risk free rates by currency denomination* 7/31/02 Euro UK SF US$ 1 year 3.514% 4.258% 1.125% 2.099% 2 year 3.816% 4.622% 1.713% 2.767% 3 year 4.110% 4.910% 2.172% 3.432% 4 year 4.342% 5.088% 2.498% 3.922% 5 year 4.530% 5.190% 2.743% 4.308% 6 year 4.688% 5.249% 2.948% 4.619% 7 year 4.819% 5.292% 3.120% 4.873% 8 year 4.928% 5.331% 3.267% 5.081% 9 year 5.017% 5.358% 3.394% 5.264% 10 year 5.087% 5.374% 3.499% 5.413% *Rates equal to zero curve fixed to floating swap rates