Teltrex International can borrow $3,000,000 at LIBOR plus a lending margin of .75 percent per annum on a three-month rollover basis from Barclays in London.Suppose that three-month LIBOR is currently 5 17/32 percent.Further suppose that over the second three-month interval LIBOR falls to 5 1/8 percent.How much will Teltrex pay in interest to Barclays over the six-month period for the Eurodollar loan?

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The interest for the first three months is calculated as $3,000,000 * (5.53125% + 0.75%) / 4 = $47,812.50. For the second three months, the interest is $3,000,000 * (5.125% + 0.75%) / 4 = $43,359.38. The total interest over six months is $47,812.50 + $43,359.38 = $91,171.88.

Teltrex International Can Borrow $3,000,000 at LIBOR Plus a Lending