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Question: Petrol Iberico, a European gas company is borrowing US$650,000,000 via a syndicatd eurocredit for six years at 80 basis points over Libor. Libor for the loan will be reset every six months. The funds will be provided by a syndicate of eight leading investment bankers, which will charge up front fees totaling 1.2% of the principal amount. What is the effective interest cost for the first year if libor is 4.00% for the first six months and 4.20% for the second six months.

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