With the US dollar getting stronger against trading partner currencies, your US-based company is debating the issue of a Euro-denominated bond versus the US dollar-pay bonds issued in the past. The Director of Finance has a hole in his debt schedule and is looking to issue 500 million USD equivalent par bonds at a 7-year maturity. Given current benchmark rates and the credit quality of the company, the Director informs that the company could issue the 7-year note at 4.25% in Euro. A US dollar issue would cost the company 4.650% over the next seven years.

You point out to the Director that the European Central Bank (ECB) has just moved from a Negative Interest Rate Policy (NIRP) to a policy rate of zero after a 50 basis point increase last week. Additional increases, you point out, could cause the Euro to strengthen against USD. Your analysis of the Euro's chances of changing in value over the next seven years is in Table 1 below. Should your company issue in Euro or USD? Why?

Table 1. Exchange Rate Movement				Table 2.. Bond Terms (USD)			Table 3. Bond Terms (EUR)
Current FX Rate (USD/EUR)	Annual in FX Rate	Probability of		Terms	Amount		Terms	Amount
1.0500	1.00%	25.00%		Principal	500,000,000		Principal	476,190,476
	0.50%	30.00%		Coupon Rate	4.65%		Coupon Rate	4.25%
	0.00%	35.00%		Maturity (Yrs)	7		Maturity (Yrs)	7
	-0.75%	10.00%		Compounding	Annual		Compounding	Annual