During the Last Year You Have Had a Loan Commitment

question 7

Multiple Choice

During the last year you have had a loan commitment from your bank to fund inventory purchases for your small business. The total line available was $500,000, of which you took down $400,000. It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees. You have misplaced the paperwork that listed the terms of the commitment, but you know you paid total fees (this does not include any interest paid to borrow the $400,000) of $1,750 on this loan commitment. You remember that the up-front fee was 25 basis points. What is the back-end fee on this loan commitment?

• A) 5 basis points
• B) 50 basis points
• C) 10 basis points
• D) 20 basis points

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Definitions:

Metaphor

A descriptive type of analogy, frequently found in literature.

Necessarily Follows

A logical condition where the conclusion is an inevitable result of the premises; if the premises are true, then the conclusion cannot be false.

Inductive

A method of reasoning in which the premises are viewed as supplying strong evidence for the truth of the conclusion.

Harmful Outcomes

Negative results or consequences that arise from a particular action or set of circumstances.