Inland Oil Arranged a $10,000,000 Revolving Credit Agreement with a Group

question 82

Multiple Choice

Inland Oil arranged a $10,000,000 revolving credit agreement with a group of small banks. The firm paid an annual commitment fee of one-half of one percent of the unused balance of the loan commitment. On the used portion of the loan, Inland paid 1.5 percent above prime for the funds actually borrowed on an annual, simple interest basis. The prime rate was at 9 percent for the year. If Inland borrowed $6,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was the total dollar cost of the loan agreement for one year?

• A) $560,000
• B) $650,000
• C) $540,000
• D) $900,000
• E) $675,000

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Definitions:

International Trade

Conducting transactions of goods and services over the boundaries of nations or territories.

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Economic Well-being relates to the standard of living and quality of life experienced by an individual, group, or nation.

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