A Firm Has a Committed Line of Credit with a Maximum

question 84

Multiple Choice

A firm has a committed line of credit with a maximum of $2.5 million and an interest rate of 9% (EAR) with a certain bank. The commitment fee is 0.65% (EAR) . The firm borrows $2 million at the start of the year, and then repays it at the end of the year. What is the total cost of the loan?

• A) $180,000
• B) $183,250
• C) $193,000
• D) $212,500

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Definitions:

Quantitative Methods

Techniques that employ mathematical analysis and statistical tools to solve problems, make decisions, or conduct research.

Qualitative Methods

Research techniques that collect non-numerical data to understand concepts, thoughts, or experiences.

Quantitative Forecasting

The use of statistical methods and mathematical models to predict future outcomes based on historical data and quantitative analysis.

Long-Range Forecasts

Predictions about future events or trends that extend far into the future, often used in strategic planning and resource allocation.