A US company needs $1,000,000 for one year. It decides to borrow euros and convert the euros to dollars. The spot rate today is $1.25/euro, and the spot rate 1 year from today is $1.35/euro. The 1-year US interest rate is 3% and the 1-year Eurozone interest rate is 4%.

a. The all-in cost of borrowing $ is 12.32%

b. The all-in cost of borrowing in $ is -3.7% because the dollar strengthened by 8%

c. Given the information in the problem, a US company would never undertake such a borrowing

d. The $ trades at a forward discount, indicating doing a forward hedge is not the best strategy because the interest rates are the same