During the Last Year You Have Had a Loan Commitment

question 26

Multiple Choice

During the last year you have had a loan commitment from your bank to fund inventory purchases for your small business. The total line available was $500,000, of which you took down $300,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $300,000) of $5,000 on this loan commitment. You remember that the up-front fee was 75 basis points. What is the back-end fee on this loan commitment?

• A) 6 basis points
• B) 62.5 basis points
• C) 75 basis points
• D) 2.5 basis points

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Definitions:

Fallacy

An error in reasoning or argumentation that leads to a conclusion being invalid or deceptive, often due to a flaw in the structure of the argument.

Equivocation

The misleading use of a term with more than one meaning or sense, causing a fallacy in argumentation due to ambiguous language.

Appeal to Ignorance

A logical fallacy in which it is claimed that a proposition is true because it has not yet been proven false, or vice versa.

Burden of Proof

The obligation to prove one's assertion or argument, typically resting on the party who makes a claim in a dispute.