60-day interest rate (simple, p.a.) are 3% at home (usd) and 4% abroad (eur). The spot rate is 1.250.

(a) Check that borrowing eur 1m (=current proceeds, not future debt), hedged, costs as much as borrowing usd 1.25m

(b) Check that if taxes are neutral, and the tax rate is 30%, also the after-tax costs are equal. (Yes, this is trivial.)

(c) How much of the costs of bowwowing swapped eur is legally interest paid and how much is capital gain or loss?

(d) If you do not have to pay taxes on capital gains and cannot deduct capital losses, would you still be indifferent between usd loans and swapped eur?