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 jumps to 5.00% 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) 5.25%
B) 5.50%
C) 6.09%
D) 6.58%

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 jumps to 5.00% 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) 5.25% 
B) 5.50% 
C) 6.09% 
D) 6.58%

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 jumps to 5.00% 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) 5.25% 
B) 5.50% 
C) 6.09% 
D) 6.58%

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