2. Botany Bay Corporation. Botany Bay Corporation of Australia seeks to borrow US$14,000,000 in the Eurodollar market.

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2. Botany Bay Corporation. Botany Bay Corporation of Australia seeks to borrow US$14,000,000 in the Eurodollar market. Funding is needed for two years. Investigation leads to three possibilities:

a. Borrow the US$14,000,000 for two years at a fixed 5.375% rate of interest.

b. Borrow the US$14,000,000 at LIBOR + 1.5%. LIBOR is currently 3.885 %, and the rate would be reset every six months

c. Borrow the US$14,000,000 for one year only at 4.625 %; at the end of the first year the company would have to negotiate for a new one-year loan Compare the alternatives and make a recommendation.

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Muhammad Salman Alvi

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