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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
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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