Botany Bay Corporation. The Botany Bay Corporation of Australia seeks to borrow US$50,000,000 in the eurodollar market.
Question:
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.
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Related Book For
Multinational Business Finance
ISBN: 9781292097879
14th Global Edition
Authors: David Eiteman, Arthur Stonehill, Michael Moffett
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