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

question 98

Multiple Choice

You have approached your local bank for a start-up loan commitment for $290,000 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 = $290,000, term = one year, up-front fee = 45 basis points, back-end fee = 80 basis points, and rate on the loan = 9.5 percent. If you immediately take down $175,000 and no more during the year, calculate the total interest and fees you have paid on this loan commitment.

• A) $17,995
• B) $18,850
• C) $19,125
• D) $18,295

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Definitions:

Cost Formula

This is an equation used to predict the total cost associated with a certain level of activity or production volume.

Employee Salaries and Wages

Compensation paid to employees for their services, which may include both fixed salaries and hourly wages.

Spending Variance

The difference between the actual amount of money spent and the budgeted amount, often analyzed in cost management.

Customers Served

The total number of customers who receive service or goods from a company within a specified period.