A Firm Has a Committed Line of Credit with a Maximum

question 87

Multiple Choice

A firm has a committed line of credit with a maximum of $1.2 million and an interest rate of 12% (EAR) with a certain bank. The commitment fee is 0.6% (EAR) . The firm borrows $500,000 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) $60,000
• B) $64,200
• C) $76,300
• D) $95,000

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Definitions:

Property Rights

The legal rights to possess, use, and dispose of assets, including the right to exclude others from using them.

Forestry Companies

Businesses involved in the cultivation, maintenance, conservation, and study of forests, woodlands, and related resources.

World Population

The total number of humans currently living on Earth.

Population Growth

The increase in the number of individuals in a population.