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

question 12

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 = one 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

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Definitions:

Compensatory Stock Option Plans

Employee benefit plans which grant the option to purchase company stock at a discounted price as compensation or incentive.

Performance-Based Stock Option Plans

Incentive programs that grant options to employees as rewards for achieving specific performance targets.

Convertible Preferred Stock

A type of preferred stock that holders can convert into a predetermined number of common shares, often at a set price.

Preferred Stock

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock, usually with fixed dividends.