Citibank offers to syndicate a Eurodollar credit for the government of Poland with the following...
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Accounting
Citibank offers to syndicate a Eurodollar credit for the government of Poland with the following terms:
Principal: US$1.0 billion
Maturity: 7 years
Interest rate: LIBOR+1.5%, reset every six months
Syndication Fees: 1.75%
Required: What are the net proceeds to Poland from this syndicated loan? Assuming that six-month LIBOR is currently at 6.35%, what is the effective borrowing cost to Poland for the first six months of this loan assuming that the expected exchange rate of Zloty remains (i) the same or (ii) depreciates by 5% ?
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