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A French utility seeks USD financing because it perceives the USD as over-bought and because USD rates are lower than EUR rates
A French utility seeks USD financing because it perceives the USD as over-bought and because USD rates are lower than EUR rates. A British bank, active in the Eurocurrency market, promises competitive rates and offers a 90-day USD 30 million loan at a rate of 4% (LIBOR convention). Loan fees are 0.4%.
Calculate the all-in cost.
Expert Solution
Loan Cost = Loan amount * Loan fees
Loan cost = $30,000,000 * 0.4%
Loan cost = $120,000
Interest = Loan amount * LIBOR rate * No. of days
Interest = 30,000,000 * 4% * 90/360
Interest = $300,000
Total all-in cost = Loan amount + Interest + Loan fees
Total all-in cost = 30,000,000 + 300,000 + 120,000
Total all-in cost = $30,420,000
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