Citibank offers to syndicate a Eurodollar credit for the government of Poland with the following terms:
Maturity 7 years
Interest rate LIBOR + 1.5 percent, reset every six months
Syndication fee 1.75 percent
a. What are the net proceeds to Poland from this syndicated loan?
b. Assuming that six-month LIBOR is currently at 6.35 percent, what is the effective annual interest cost to Poland for the first six months of this loan?
a. Syndication fee is the money paid to the bank for arranging the loan. In this case the loan amount is 1,000,000,000. The free is 1.75% of the loan amount and comes to 17,500,000. Since this amount ...
The solution explains how to calculate the net proceeds of a syndicated loan in eurodollars and the effective cost of the loan