Between 2019 and 2022, the Marginal Lending Rate increased from 0.25% to 2.75%. If a €400 million loan portfolio accrued interest at the Marginal Lending Rate each year, by how much (in € millions) did the annual interest cost increase from 2019 to 2022?
| Year | ECB Main Refinancing Rate (%) | Deposit Facility Rate (%) | Marginal Lending Rate (%) |
|---|---|---|---|
| 2018 | 0.00 | -0.40 | 0.25 |
| 2019 | 0.00 | -0.50 | 0.25 |
| 2020 | 0.00 | -0.50 | 0.25 |
| 2021 | 0.00 | -0.50 | 0.25 |
| 2022 | 2.50 | 2.00 | 2.75 |
Choose your answer
Explanation
Annual interest cost in 2019: €400M × 0.25% = €400M × 0.0025 = €1.0 million. Annual interest cost in 2022: €400M × 2.75% = €400M × 0.0275 = €11.0 million. Increase = €11.0M - €1.0M = €10.0 million.