Smith Enterprise Credit Line (W/o Comp)

question 83

Multiple Choice

Smith Enterprise Credit line (w/o comp)
Smith Enterprise has an one year credit line of $5,000,000 with Second Bank. On average Smith uses $3,250,000 of the credit line. Second Bank charges a .45% commitment fee on the unused portion of the line and the interest rate is set at LIBOR +1.5%. Assume that the LIBOR is 6.3%
-Refer to Smith Enterprise Credit line (w/o comp) .What would be the effective borrowing rate if you exhausted your line of credit?

• A) 8.04%
• B) 7.80%
• C) 8.48%
• D) 8.21%

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