Calculating Fees on a Loan Commitment During the Last Year

question 18

Multiple Choice

Calculating Fees on a Loan Commitment During the last year you have had a loan commitment from your bank to fund inventory purchases for your small business.The total line available was $500,000,of which you took down $300,000.It is now the end of the loan commitment period and your bank is asking you to pay the back-end fees.You have misplaced the paperwork that listed the terms of the commitment,but you know you paid total fees (this does not include any interest paid to borrow the $300,000) of $5,000 on this loan commitment.You remember that the up-front fee was 75 basis points.What is the back-end fee on this loan commitment?

• A)6 basis points
• B)62.5 basis points
• C)75 basis points
• D)2.5 basis points

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Definitions:

License

A permit or authorization granted by a competent authority or the owner to use a particular property, asset, or intellectual property under certain conditions.

Produce

The act of creating, manufacturing, or growing goods, often in relation to agriculture or manufacturing sectors.

Land

A natural resource encompassing the earth's surface, both the soil and the underlying geology, as well as the attached rights and interests.

Tenant

An individual or organization that occupies land or property rented from a landlord.