Calculating Fees on a Loan Commitment You Have Approached Your

question 89

Multiple Choice

Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $1,000,000 needed to open a car 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 = $1,000,000,term = one year,up-front fee = 20 basis points,back-end fee = 50 basis points,and rate on the loan = 9 percent.If you immediately take down $750,000 and no more during the year,what is the total interest and fees you have paid on this loan commitment?

• A)$70,250
• B)$70,750
• C)$74,500
• D)$93,250

---

Definitions:

Comparative Analysis

The process of comparing two or more items, such as data sets, statistical results, or models, to identify their similarities and differences.

Simple Exponential Smoothing Model

A forecasting technique that applies smoothing constants to previous observations, typically used for time series data without trend or seasonality.

Trend

A general direction in which something is developing or changing, often identified in data analysis or market movements.

Seasonality

The occurrence of variations that repeat at specific regular intervals less than a year, often influenced by the calendar or weather.