TABLE 7.2
Use the information for Polaris Corporation to answer the following question(s).
Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. 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%

-Refer to Table 7.2. If the LIBOR rate falls to 3.00% after the first year what will be the all-in-cost (i.e. the internal rate of return) for Polaris for the entire loan?
A) 4.00%
B) 4.50%
C) 5.25%
D) 5.60%

Question

TABLE 7.2
Use the information for Polaris Corporation to answer the following question(s).
Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. 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%
 
-Refer to Table 7.2. If the LIBOR rate falls to 3.00% after the first year what will be the all-in-cost (i.e. the internal rate of return) for Polaris for the entire loan?
A) 4.00% 
B) 4.50% 
C) 5.25% 
D) 5.60%

Quizplus · Accepted Answer

The Answer of TABLE 7.2
Use the information for Polaris Corporation to answer the following question(s).
Polaris is taking out a $5,000,000 two-year loan at a variable rate of LIBOR plus 1.00%. 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%
 
-Refer to Table 7.2. If the LIBOR rate falls to 3.00% after the first year what will be the all-in-cost (i.e. the internal rate of return) for Polaris for the entire loan?
A) 4.00% 
B) 4.50% 
C) 5.25% 
D) 5.60%

TABLE 7.2 Use the Information for Polaris Corporation to Answer the Following