You're Flora of Flora's Flowers. You borrowed $2.2 million from Big Bad Bank for 5 years beginning July 19 2020. The terms are 1-month LIBOR + 2.5%, amortization is 25% every July 19 beginning in 3 years. Suppose 1-month LIBOR when the loan begins (July 19) is 1.25% and on August 19 it is 1.5%. The amount of interest you pay on August 19 (ignoring any weekend issues) is:
a) .0125 x (31/360) x 2,200,000
b) .0375 x (31/360) x 2,200,000
c) .04 x (31/360) x 2,200,000
d) (.04 /12) x 2,200,000
e) (.015 /12) x 2,200,000
Answer: b) .0375 x (31/360) x 2,200,000
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