You Have Approached Your Local Bank for a Start-Up Loan

question 101

Multiple Choice

You have approached your local bank for a start-up loan commitment for $450,000 needed to open a computer repair store. You have requested that the term of the loan be one year. Your bank has offered you the following terms: size of loan commitment = $450,000, term = one year, up-front fee = 20 basis points, back-end fee = 50 basis points, and rate on the loan = 12 percent. If you immediately take down $200,000 and no more during the year, calculate the total interest and fees you have paid on this loan commitment.

• A) $34,250
• B) $26,150
• C) $24,900
• D) $24,000

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