Consider a syndicated loan with the following characteristics:

The size of the loan is $600 million.

The interest rate on the loan is set at the beginning of each year with the following mechanism:

i = LIBOR + 2.5%

where LIBOR used will be the beginning of year LIBOR. Assume that at the time of signing the syndicated loan agreement, LIBOR is 3.5%.

The upfront fee is 1.0% of the maximum amount of the loan.

The commitment fee is 0.75% at the annual rate.

The term of the loan is 5 years.

The interest reset period is one year

Suppose the borrower uses $400 million in the first month of the loan, $500 million during the subsequent four months, $600 million in the next four months, and $300 million in the last three months of the first year.

Calculate the cost per dollar of average funds used in the first year of the syndicated loan