Calculating Fees on a Loan Commitment You Have Approached Your

question 103

Multiple Choice

Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $500,000 needed to open a furniture 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 = $500,000,term = one year,up-front fee = 30 basis points,back-end fee = 60 basis points,and rate on the loan = 10 percent.If you immediately take down $250,000 and no more during the year,what is the total interest and fees you have paid on this loan commitment?

• A)$27,250
• B)$28,000
• C)$29,500
• D)$53,000

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Definitions:

Profit-Maximizing

The procedure companies undertake to find the best combination of price and production volume for peak profit.

Output

The quantity of goods or services produced by a company, industry, or economic system.

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A planned residential community, often including various amenities, constructed by developers and divided into individual properties for sale.

Profit-Maximizing

A strategy or behavior that seeks to achieve the highest possible profit from business operations, given certain constraints and market conditions.