Katie's Karate Dojo Has a Committed Line of Credit with a Maximum

question 84

Multiple Choice

Katie's Karate Dojo has a committed line of credit with a maximum of $350,000 and interest rate of 6% (EAR) .The loan has a commitment fee of 0.5% (EAR) .If the firm borrows $300,000 at the start of the year and repays it at the end of the year,what is the total cost of the loan?

• A)$18,000
• B)$18,250
• C)$19,500
• D)$21,250
• E)$21,000

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Definitions:

Marginal Revenue

The additional income earned by selling one more unit of a product or service.

Average Total Cost

The total cost divided by the quantity produced, indicating the average cost per unit of output.

Economic Profit

The difference between a firm's total revenues and its total costs, including both explicit and implicit costs, measured in terms of opportunity costs.

Long Run

A period in economics where all factors of production and costs are variable, allowing full adjustment to changes.