Calculating Fees on a Loan Commitment You Have Approached Your

question 47

Multiple Choice

Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $200,000 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 = $200,000, term = 1 year, up-front fee = 50 basis points, back-end fee = 80 basis points. If you take down 95 percent of the total loan commitment, calculate the total fees you have paid on this loan commitment.

• A) $1000
• B) $1080
• C) $1600
• D) $2520

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Definitions:

Operating Activities

Operating activities involve the primary revenue-generating activities of an entity, as reflected in its profits or losses from core operations.

Depreciation

The method of allocating the cost of a tangible asset over its useful life, reflecting the loss of value over time.

Accounts Payable

Liabilities to creditors for goods, services, or supplies delivered or used in the earning process but not yet paid for.

Free Cash Flow

A financial measure representing the amount of cash generated by a business that is available for distribution to its security holders after accounting for reinvestment in assets.