Assume a Bank Makes a Loan Commitment to the Value

question 9

Multiple Choice

Assume a bank makes a loan commitment to the value of $10 million at a fixed interest rate of 10% per annum for a period of one year.Assume the borrower only uses 50% of the provided funds over the course of the year.If the bank charges a back-end fee of 0.5%, what is the additional revenue the bank would generate?

• A)None, unless the loan is prepaid early.
• B)$2500
• C)$25 000
• D)$5000

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Definitions:

Business Reports

Documents that provide an analysis of the business situation, often aimed at assisting in decision-making processes.

Cause-Effect

A relationship where one event (the cause) leads to the outcome of another event (the effect).

Interpretation

The action of explaining the meaning of something, or a way of understanding information within a specific context.

Income Records

Documentation that details the earnings or revenue received by an individual or organization over a certain period.