Question

Petrol? Ibérico, a European gas? company, is borrowing ?$550,000,000 via a syndicated eurocredit for six years at 120basis points over LIBOR. LIBOR for the loan will be reset every six months. The funds will be provided by a syndicate of eight leading investment? bankers, which will charge? up-front fees totaling 1.1?% of the principal amount. What is the effective interest cost for the first year if the annual LIBOR is 3.90?% during the first six months and 4.10% during the second six months.

Answer 1

DATA GIVEN :- AMOUNT REQUIRED BY GAS COMPANY:-$550,000,000 INTREST RATE:120BASIS POINTS OVER THE LIBOR FIRST 6 MONTH LIBOR RATR:- 3.9% 6 MONTH LIBOR RATR:- 4.10% FOLLOWING CALCULATION ARE REQUIRED :-      For the First 6 Month Intrest rate shall be ( 3.9+1.2)% For the Second 6 Month Intrest rate shall be(4.1+1.2)% half yearly Intrest rate for the first 6 month =(5.1/2) =2.55%   half yearly Intrest rate for the second 6 month =(5.3/2) =2.65% Effective Intrest Rate for The year:- ( (1+.0255)*(1+.0265)-1) *100= 5.2675%