Question

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?

Answer 1

The interest rate that should be paid by ABC to Barclays over the six months for the eurodollar loan is $118,000.

The interest rate means the number borrower charges a borrower and is a percentage of the principal—the number loaned. The interest rate on a loan is kind of noted on an annual basis called as the annual percentage rate (APR).

The interest value that should be paid by ABC International is:

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

The sum of interest for the 6 month period = $61,500 + $56,500 = $118,000

Learn more about rate of interest at https://brainly.com/question/13324776

#SPJ4