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

question 54

Multiple Choice

You have approached your local bank for a start-up loan commitment for $175,000 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 = $175,000, term = 1 year, up-front fee = 75 basis points, back-end fee = 80 basis points. If you take down 75 percent of the total loan commitment, calculate the total fees you have paid on this loan commitment.

• A) $2,712.50
• B) $1,312.50
• C) $1,550.00
• D) $1,662.50

---

Definitions:

Bonds Retired

The act of paying off or buying back issued bonds before their maturity date.

Machinery

Industrial or commercial devices or equipment designed to perform specific tasks, often contributing to the production of goods.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to reflect cash transactions.

Current Assets

Assets that are expected to be converted into cash, sold or consumed within one year or the operating cycle, whichever is longer.