Petrol Ibrico.Petrol Ibrico, a European gas company, is borrowing

$750,000,000

via a syndicated eurocredit for six years at

110

basis points over LIBOR. LIBOR for the loan will be reset every six months. The funds will be provided by a syndicate of eight leading investment bankers, which will charge up-front fees totaling

1.1%

of the principal amount. What is the effective interest cost for the first year if the annual LIBOR is

4.30%

during the first six months and

4.60%

during the second six months.

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Part 1

The effective interest cost for the first year is

enter your response here%.

(Round to two decimal places.)