A Firm Has a Committed Line of Credit with a Maximum

question 27

Multiple Choice

A firm has a committed line of credit with a maximum of $10 million and an interest rate of 8.5% (EAR) with a certain bank. The commitment fee is 0.5% (EAR) . The firm borrows $2 million at the start of the year and then repays it at the end of the year. What is the total cost of the loan?

• A) $520,000
• B) $680,000
• C) $210,000
• D) $720,000

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Definitions:

Infant-Directed Speech

Uses shorter words and sentences, higher and more varied pitch, repetitions, a slower rate, and longer pauses; also known as motherese.

Cognitive Equilibrium

A balance between the processes of assimilation and accommodation such that an individual’s schemas match the world.

Disequilibrium

A state of imbalance or instability, particularly in contexts such as economics, physical processes, or cognitive development.

Broca's Area

A region in the frontal lobe of the dominant hemisphere (usually the left) of the brain with functions linked to speech production.