Youre Flora of Floras Flowers. You borrowed $2.2 million from Big Bad Bank for 5 years beginning July 19 2020. The terms are 1-month LIBOR + 2.5%, amortization is 25% every July 19 beginning in 3 years. Suppose 1-month LIBOR when the loan begins (July 19) is 1.25% and on August 19 it is 1.5%. The amount of interest you pay on August 19 (ignoring any weekend issues) is:

1. .0125 x (31/360) x 2,200,000

2. .0375 x (31/360) x 2,200,000

3. .04 x (31/360) x 2,200,000

4. (.04 /12) x 2,200,000

5. (.015 /12) x 2,200,000