Question
American Pharoah management is planning to make a $2.0 million loan to a French firm. Currently, LIBOR is at 1.5 percent. American management considers a
American Pharoah management is planning to make a $2.0 million loan to a French firm. Currently, LIBOR is at 1.5 percent. American management considers a default risk premium of 1.30 percent, a foreign exchange rate risk premium of 0.20 percent, and a country risk premium of 0.13 percent to be appropriate for this loan.
What is the loan rate charged by American Pharoah?
Loan rate charged ________%
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
