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:

Vertical Thinking

A problem-solving approach that involves logical and sequential steps, focusing on known solutions and strategies.

Lateral Thinking

A problem-solving approach that involves viewing problems from new and unconventional perspectives, often leading to creative solutions.

Bounded Rationality Model

A concept in decision-making theories that acknowledges the limitations of human cognitive abilities when making decisions.

Suboptimal Decision

A choice made that is not the best possible or most effective given the circumstances or available options.