A $200 Million Loan Commitment Has an Up-Front Fee of 20

question 16

Multiple Choice

A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion.

The up-front fee is

• A)$250,000.
• B)$4,000,000.
• C)$400,000.
• D)$775,000.

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Definitions:

Marginal Cost

The price involved in creating another unit of a good or service.

Break-even Price

The price at which total revenues equals total costs, resulting in neither profit nor loss.

Shut-down Price

The price level at which a business's revenue just covers its variable costs, below which it will cease operations.

Average Variable Cost

The average cost of variable inputs (like labor and materials) per unit of output produced.