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Austal Ship plans to borrow 1
Austal Ship plans to borrow 1.21 million Australian dollars (A$) for three years. It obtains a floating rate loan from a bank at the interest rate equal to the LIBOR + 2.98 (%). Austal Ship also forecasts 3.77%, 4.36%, and 4.85% LIBOR in year1, year2, and year3, respectively. How much total interest Austal Ship needs to pay for A$1.21 millions in three years of the loan period? (enter the whole number without sign or symbol)
Expert Solution
Interest in each year = amount of loan * (LIBOR + 2.98%)
Interest in year 1 = $1.21 million * (3.77% + 2.98%) = $81,675
Interest in year 2 = $1.21 million * (4.36% + 2.98%) = $88,814
Interest in year 2 = $1.21 million * (4.85% + 2.98%) = $94,743
Total interest = $81,675 + $88,814 + $94,743
Total interest = $265,232
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