Problem $14\mathrm{.}9$

Ashton Bishop is the debt manager for World Telephone, which needs $3\mathrm{.}42$ billion Euro financing for its operations.

Bishop is considering the choice between issuance of debt denominated in:

Euros $(),$ or

U$.$S$.$ dollars, accompanied by a combined interest rate and currency swap.

Bishop believes that issuing the U$.$S$.-$dollar debt and entering into the swap can lower World's cost of debt by $45$ basis

points. Immediately after selling the debt issue, World would swap the U$.$S$.$ dollar payments for Euro payments

throughout the maturity of the debt. She assumes a constant currency exchange rate throughout the tenor of the swap.

Required:

b$.$ Enter the notional principal and interest payment cash flows of the combined interest rate and currency swap.

Note: Round the final answers to two decimal places.

c$.$ State whether or not World would reduce its borrowing cost by issuing the debt denominated in U$.$S$.$ dollars,

accompanied by the combined interest rate and currency swap.