ABC International Can Borrow $4,000,000 at LIBOR Plus a Lending

question 63

Multiple Choice

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)$50,000
• B)$100,000
• C)$118,000
• D)$120,000

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Definitions:

Total Revenue

The overall amount of money generated from the sale of goods or services before any expenses are subtracted.

Output

The quantity of goods or services produced in a given time period.

Price Per Unit

The cost of a single unit of a product or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping.