A MNC has been looking at borrowing in the international debt markets. It notices that the current 30day London interbank offer rate is 4.9% (all rates are stated on an annualized basis). The MNC predicts that the next period's 30 day LIBOR is 8%. The MNC's credit rating implies that it will face a 1.6% premium over LIBOR. What re its borrowing costs (on an annualized basis)?

Answer

a.

This period: 4.9% ; Next Period: 8.0%

b.

This period: 9.6% ; Next Period: 9.6%

c.

This period: 6.5% ; Next Period: 9.6%

d.

This period: 4.9% ; Next Period: 4.9%

e.

This period: 6.5% ; Next Period: 6.5%