Calculate the all-in-cost of the loan with the interest rate

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Question: Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 2.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 2.00%.

Suppose Polaris decides to engage in an interest rate swap in which Polaris would pay fixed 5% and receive LIBOR on a notional value of $50 million. Calculate the all-in-cost (AIC) of the loan with the interest rate swap.

 

Reference no: EM133373429

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