Calculating Fees on a Loan Commitment Starr Co

question 52

Multiple Choice

Calculating Fees on a Loan Commitment Starr Co.has been approved for a $100,000 loan commitment from its local bank.The bank has offered the following terms: term = one year,up-front fee = 75 basis points,back-end fee = 25 basis points,and rate on the loan = 8.00 percent.Starr expects to immediately take down $80,000 and no more during the year unless there is some unforeseen need.What is the total interest and fees Starr can expect to pay on this loan commitment?

• A)$7,050
• B)$7,175
• C)$7,200
• D)$7,400

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