A Firm Has a Committed Line of Credit with a Maximum

question 27

Multiple Choice

A firm has a committed line of credit with a maximum of $10 million and an interest rate of 8.5% (EAR) with a certain bank. The commitment fee is 0.5% (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) $520,000
• B) $680,000
• C) $210,000
• D) $720,000

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Definitions:

Potential Sale

A sales opportunity that has been identified but not yet realized or converted into an actual sale.

Hard Sell Techniques

Aggressive sales strategies that pressure the customer into making a purchase decision quickly.

Negative Information

Data or facts that reflect poorly on a subject, often highlighting flaws, errors, or undesirable traits.

Third Party

An entity that is involved in a transaction or situation but is not one of the principal parties.