QUESTION 74 For the next 4 questions suppose the following data holds: Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 2.00%. The LIBOR rate will be reset each year at an agreed upon date. The current LIBOR rate is 4.00% per year. The loan has an upfront fee of 2.00%. What is the all-in-cost (AIC, i.e., the internal rate of return) of the Polaris loan including the LIBOR rate, fixed spread and upfront fee? O 7.11% 7.33% 7.60% 7.84% 8.12% QUESTION 75 If the LIBOR rate jumps to 5.00% after the first year, what will be the AIC for Polaris for the entire loan? O 7.11% 7.33% O 7.60% 7.84% 8.12% QUESTION 76 Polaris buys the forward rate agreement (FRA) from an insurance company. According to the contract, if LIBOR rises above 4%, the initial forecast, the insurance company would pay to Polaris at the end of each year the difference between the LIBOR and 4%. In the opposite case, i.e., if LIBOR falls below 4%, Polaris would pay the difference between 4% and real LIBOR to the insurance company. The purchase of the forward rate agreement will cost $200,000, paid at the time of the initial loan. Calculate the all-in-cost (AIC) of the loan based on the assumption that the LIBOR rate jumps to 5.00% after the first year. O 7.11% O 7.33% 7.60% 7.84% 8.12% QUESTION 77 Suppose Polaris decides to engage in an interest rate swap in which Polaris would pay fixed 5% and receive LIBOR on a notional value of $50 million. Calculate the all-in-cost (AIC) of the loan with the interest rate swap. O 7.11% 7.33% O 7.60% O 7.84% 8.12%