4. What is the usual day/year convention for calculating the Unfunded Fee and Letter of Credit (LOc) Fees?

Non-multiple choice question: Where can you change the default settings for Rate Option day/year counts in WSO?

a) Act/Act
b) Act/360
c) Act/365
d) 30/360

Answer (Highlight area below to see answer)

b) Act/360

Most credit agreements use Act/360. However, there may be an exception and the credit agreement would specify the day and year count to use.

4A. Where in WSO can you change the default settings for Rate Option day/year counts in WSO?

Answer (Highlight area below to see answer)

In WSO Administrator – View/Rate Options – highlight the LOC and change the year count field to 360, click the save icon. Do the same for the UNFND fee.

5. Libor is considered a “contract” and if a paydown or split is made to a Libor contract prior to the Maturity Date, there is a possible fee that’s payable to the Lender’s. What is the name of that fee?

a) Breakfunding Fee
b) Consent Fee
c) Penalty Fee
d) Ticking Fee

Answer (Highlight area below to see answer)

a) Breakfunding Fee

The most often used term is Breakfunding Fee – however you could also see Breakage Fee.

6. There’s a Libor contract with a start date of 12/30/2000 and a Next Payment Date and Maturity Date of 3/30/2001 at an all in rate of 9.875% (Base rate is 6.875% and spread is 3.00%) and your share of the contract is $5m. A Prepayment notice is received on 1/28/2001 with an Effective Date of 1/31/2001 for $2.5m your share paydown. What Libor Rate would you look up and for what date would you look it up.

a) 1 Month Libor effective 1/28/2001
b) 1 Month Libor effective 1/31/2001
c) 2 Month Libor effective 1/28/2001
d) 2 Month Libor effective 1/31/2001

Answer (Highlight area below to see answer)

d) 2 Month Libor effective 1/31/2001

To determine which Libor you need to look up, you find the number of days between the Effective Date of the paydown and the Maturity Date of the contract. In this case, it’s 58 days, so you would select 2 Month Libor. The Agent Banks often list a date to claim by on their notices.

To look up on Bloomberg type the following: LIBOUS2MTH[INDEX]HP[GO]
[INDEX] = Yellow key on top row of keyboard
[GO] = Green enter key on keyboard
LIBOUS = Libor
2MTH = 2 Month
HP = Px Table with Average Daily Volume