Question

Petrol ibence. Petrol tbenco, a European gas company is borrowing The tr swa te pr ned by a synde teofeg t lead g strent bankers which wil charge uphont t es totaing 1 2% of he pm c 650,000,000 via a syndicated eurocredit for six years at 80 basis points over LIBOR.LIBOR for the loan will be reset every sx months al amount Whats the effective interest cost for the first year the annu The efecive eest cost tor the terst year isRound to two decimal places)

Answer 1

Principal borrowed	650000
Issuance fee	1.20%
Interest Costs	First 6 months	Next 6 months
LIBOR	4.00%	4.20%
Spread	0.80%	0.80%
Total cost	4.80%	5.00%
Borrowing	650000
Less issuance fee	7800
Net loan	642200
	First 6 months	Next 6 months
Interest	15600	16250
Total interest	31850
Cost (Interest/Net Loan)	4.96%