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nexus9112 [7]
3 years ago
5

ABC International can borrow $4,000,000 at LIBOR plus a lending margin of 0.65 percent per annum on a three-month rollover basis

from Barclays in London. Three month LIBOR is currently 5.5 percent. Suppose that over the second three-month interval LIBOR falls to 5.0 percent. How much will ABC pay in interest to Barclays over the six-month period for the Eurodollar loan?
A. $50,000B. $100,000C. $118,000D. $120,000
Business
1 answer:
Anastaziya [24]3 years ago
4 0

Answer:

C) $118,000

Explanation:

ABC International will have to pay the following interests:

  • for the first three month period:

$4,000,000 x (5.5% + 0.65%) x 1/4 = $61,500

  • for the second three month period:

$4,000,000 x (5% + 0.65%) x 1/4 = $56,500

total interest for the 6 month period = $61,500 + $56,500 = $118,000

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Hello. You forgot to show the calculations made by Nico and Lorena. The calculations are shown in the attached figure.

Answer:

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Explanation:

As you can see in the image below, Nico and Lorena had to solve the expression (2) x (1/6) x (-4/5).

In this case, the correct resolution is Noco's resolution, since it has the following resolution steps:

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