Botany Bay Corporation. The Botany Bay Corporation of Australia seeks to borrow US$50,000,000 in the eurodollar market. Funding is needed for two years. Investigation leads to three possibilities.

a. Borrow the US$50,000,000 for two years at a fixed 5.50% rate of interest.

b. Borrow the US$50,000,000 at LIBOR + 0.50%, and the rate would be reset every six months.

c. Borrow the US$50,000,000 for one year only at 5.25%. At the end of the first year, Botany Bay Corporation would have to negotiate for a new 1-year loan.

Compare the alternatives and make a recommendation.

Assume that LIBOR is currently 5.00% for all maturities.