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

question 37

Multiple Choice

ABC International can borrow $4,000,000 at LIBOR plus a lending margin of .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:

Encodes

The process by which genetic information is chemically converted into RNA and protein in living organisms, or, more broadly, the process of converting data into a particular form.

Short-Term Memory

The capacity for holding a small amount of information in mind in an active, readily available state for a short period of time.

Capacity

The maximum amount that something can contain or the ability of something, whether physical or mental, to perform, produce, or withstand.

Atkinson-Shiffrin Model

A theory of human memory that proposes memory is composed of three main components: sensory memory, short-term memory, and long-term memory.