2. Retail Manufacturing of NYC, borrows $2,500,000 at LIBOR plus a lending margin of 1.15 percent...

2. Retail Manufacturing of NYC, borrows $2,500,000 at LIBOR plus a lending margin of 1.15 percent per annum on a six-month rollover basis from a London bank. If six-month LIBOR is 3 ½ percent over the first six-month interval and 4 3/8 percent over the second six-month interval, how much will Grecian Tile pay in interest over the first year of its Eurodollar loan?

You will use the provided information to Calculate the paid interest over the first year of its Eurodollar loan.

Formula is provided as follows: Please provide the brief interpretation to support your calculation.

Formula:
LIBOR x (LIBOR IR + Lending Margin)/2 + LIBOR x (Interval interest + lending margin) /2

Solutions

Expert Solution

Interest over the first year of its Eurodollar loan =LIBOR x (LIBOR IR + Lending Margin)/2 + LIBOR x (Interval interest + lending margin) /2

= $2500000 *(0.035 + 0.0115 )/2 + $2500000 *(0.04375 + 0.0115)/2

= $58125 + $69062.5

= $127187.5

Grecian Tile pay in interest over the first year of its Eurodollar loan is $127187.5

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Alphaget Inc., borrows $1,500,000 at LIBOR plus a lending margin of 1.25 percent per annum on...

Alphaget Inc., borrows $1,500,000 at LIBOR plus a lending margin of 1.25 percent per annum on a three-month rollover basis from a London bank. If three-month LIBOR is 4 ½ percent over the first three-month interval and 5 3/8 percent over the second three-month interval, how much will Alphaget pay in interest over the first year of its Eurodollar loan? Select one: a. $43,057 b. $46,406 c. $47,658 d. $49,432

76. ABC International can borrow $4,000,000 at LIBOR plus a lending margin of .65 percent per...

76. ABC International can borrow $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London. Three month LIBOR is currently 5.5 percent. Suppose that over the second three-month interval LIBOR falls to 5.0 percent. How much will ABC pay in interest to Barclays over the six-month period for the Eurodollar loan? A. $50,000 B. $100,000 C. $118,000 D. $120,000 77. You entered in to a 3 × 6 forward...

An insurance company owns RM50 million of floating-rate bonds yielding LIBOR plus 1 percent. These loans...

An insurance company owns RM50 million of floating-rate bonds yielding LIBOR plus 1 percent. These loans are financed by RM 50 million of fixed-rate guaranteed investment contracts (GICs) costing 10 percent. A finance company has RM 50 million of auto loans with a fixed rate of 14 percent. The loans are financed by RM 50 million of CDs at a variable rate of LIBOR plus 4 percent. a) What is the risk exposure of the insurance and finance company? (b)Propose a...

Santiago Manufacturing prices its products at full cost plus 40 percent. The company operates two support...

Santiago Manufacturing prices its products at full cost plus 40 percent. The company operates two support departments and two producing departments.Budgeted costs and normal activity levels are as follows: Support Departments Producing Departments A B C D Overhead costs $20,000 $50,000 $90,000 $120,000 Square feet 2,000 2,400 4,000 12,000 Number of employees 20 30 60 40 Direct labor hours - - 10,000 6,400 Machine hours - - 6,000 10,800 Support Department A's costs are allocated based on square feet, and...

True and false questions 1. Contribution margin plus variable cost will equal revenue? 2. Capital budgets...

True and false questions 1. Contribution margin plus variable cost will equal revenue? 2. Capital budgets are used for the budgeting of large expensive expenditures? 3. Ending inventory in a purchases budget is based on next months forecasted sales? 4. Only manufacturing companies can use job order cost accounting? 5. Unfavorable and favorable variances are both investigated? 6. Break-even is the point at which a company achieves its target profit? 7. Contribution margin and gross margin are the same thing?...

2 large retail companies (W and T) are compared on a Census variable, percent of people...

2 large retail companies (W and T) are compared on a Census variable, percent of people who own their home within 3 square miles of the store. The percent that own their home for W is: 84, 79, 73, 81, 74, 77, 64, 78, 78, 78, 61 Percent for T is: 58, 61, 57, 62, 61, 59, 56, 64, 61, 70. - Estimate the difference in percent owning their home for the two companies as to central tendency using lambda=.05....

Homework LP10 #2 Landcruisers Plus (LP) has operated an online retail store selling off-road truck parts....

Homework LP10 #2 Landcruisers Plus (LP) has operated an online retail store selling off-road truck parts. As the name implies, the firm specializes in parts for the venerable Toyota FJ40 that is known throughout the world for its durability and offroad prowess. The fact that Toyota stopped building and exporting the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on re-manufactured parts to keep their beloved off-road vehicles running. More and more FJ40...

A commercial bank has $200 million of floating-rate loans yielding the T-bill rate plus 2 percent....

A commercial bank has $200 million of floating-rate loans yielding the T-bill rate plus 2 percent. These loans are financed with $200 million of fixed-rate deposits costing 9 percent. A savings bank has $200 million of mortgages with a fixed rate of 13 percent. They are financed with $200 million in CDs with a variable rate of T-bill rate plus 3 percent. (LG 10-7) Discuss the type of interest rate risk each institution faces. Propose a swap that would result...

Match the following. 1.Direct labor, direct materials, and manufacturing overhead. a. Gross margin 2.Costs that are...

Match the following. 1.Direct labor, direct materials, and manufacturing overhead. a. Gross margin 2.Costs that are expensed in the period they are incurred. b.Controllable costs 3.Sales less variable expenses. c. Manufacturing margin 4.Cost a manager can determine or greatly affect the amount. d. Absorption costing 5.A costing method that includes only variable manufacturing costs. e. Period costs 6.An income statement format that focuses on cost behavior. f. Contribution margin 7.Sales less cost of goods sold. g. Variable costing 8.A costing...

1. Determine the amount of under applied or over applied manufacturing overhead for the period. 2. What is the effect on gross margin for the period?

Cretin Enterprises uses a predetermined overhead rate of $7 .50 per direct labour hour. This predetermined rate was based on 16,000 estimated direct labour-hours and $120,000 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $114,750 and 15,500 total direct labour-hours during the period. There were no beginning inventories, and all goods produced in the period were shipped out to customers before period end. Required: 1. Determine the amount of under applied or over...

Subjects