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On 1st January 20X1, ATM Ltd borrows USD from a London bank. The loan is a 2-year floating interest rate loan with the principal is $300 million. The Interest is paid every 6 months at the rate of $-LIBOR+1.50% pa. The principal is repaid all at once at the loan maturity (i.e., an interest-only loan). To complete the loan application, the London bank also charges ATM with an upfront fee of 1.0% of the total loan proceed. The following table shows movements of $-LIBOR with various tenors over the coming 2 years. All figures are reported in % pa. Show cash flows from this loan to ATM. Calculate the effective borrowing cost from this loan (show the result in both % per 6 month and % pa.)? Keep at least 6 decimal points (i.e., 0.054812 or 5.4812%) in the calculation.
Tenor
Date Observed
1st Jan X1
1st Jul X1
1st Jan X2
1st Jul X2
1st Jan X3
3-Month
2.25
2.40
2.20
2.10
2.35
6-Month
2.50
2.65
2.45
2.60
12-Month
2.75
2.90
2.70
2.85
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