A Firm Has a Committed Line of Credit with a Maximum

question 84

Multiple Choice

A firm has a committed line of credit with a maximum of $2.5 million and an interest rate of 9% (EAR) with a certain bank. The commitment fee is 0.65% (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) $180,000
• B) $183,250
• C) $193,000
• D) $212,500

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Definitions:

Negative Outcome

An undesired or unfavorable result in a particular situation, often differing significantly from the expected or intended outcome.

Business Negotiations

The process by which parties come to an agreement on business matters, involving discussion and compromise to achieve a decision that is acceptable to all involved.

Germany

A country in Central Europe, known for its rich history, culture, and contributions to art, science, and economy.

Italy

A country located in southern Europe, known for its rich history, art, architecture, fashion, and cuisine.