Calculating Fees on a Loan Commitment Starr Co

question 106

Multiple Choice

Calculating Fees on a Loan Commitment Starr Co. has been approved for a $100,000 loan commitment from its local bank. The bank has offered the following terms: term = 1 year, up-front fee = 75 basis points, back-end fee = 25 basis points, and rate on the loan = 8.00%. Starr expects to immediately take down $80,000 and no more during the year unless there is some unforeseen need. What is the total interest and fees Starr can expect to pay on this loan commitment?

• A) $7050
• B) $7175
• C) $7200
• D) $7400

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