
Introduction 17
P R O B L E M S
1. Mahindra and Mahindra decide to take a oating rate loan in
the Euro market on April 1, 2009, with the following charac-
teristics:
Principal amount USD 10 million
Interest reset period Every three months
Maturity of loan Five years
Base rate 3-month USD LIBOR
Premium over base rate 250 basis points
Assume that the actual rates on April 1, 2009; July 1, 2009;
October 1, 2009; and January 1, 2010, are:
3-month LIBOR as of April 1, 2009 6.3%
3-month LIBOR as of July 1, 2009 5.6%
3-month LIBOR as of October 1, 2009 5.9%
3-month LIBOR as of January 1, 2010 6.6%
(i) What will be the e ective ...