If the current 180-day inter-bank Eurodollar rate is 15% all rates are stated on an annualized basis)and next period's LIBOR is 13%,then a Eurocurrency loan priced at LIBOR plus 1% will cost
A)16% this period and 16% next period
B)15% this period and 14% next period
C)16% this period and 14% next period
D)15% this period and 15% next period

Question

Quizplus · Accepted Answer

The loan cost this period is based on the current Eurodollar rate (15%) plus 1%, totaling 16%. Next period, the cost is based on the expected LIBOR (13%) plus 1%, totaling 14%.

If the Current 180-Day Inter-Bank Eurodollar Rate Is 15% All