Problem: Citibank offers to syndicate a Eurodollar credit for the government of Poland with the following terms:
Principal U.S.$1,000,000,000
Maturity 7 years
Interest rate LIBOR + 1.5 percent, reset every six months
Syndication fee 1.75 percent
Q1. What are the net proceeds to Poland from this syndicated loan?
Q2. Assuming that six-month LIBOR is currently at 6.35 percent, what is the effective annual interest cost to Poland for the first six months of this loan?