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

---

Definitions:

Precising Definition

A definition, used to reduce vagueness, that goes beyond the ordinary lexical definition.

Nonverbal Language

Communication without the use of spoken language, including gestures, facial expressions, and body language.

Communicating

The process of conveying information or expressing ideas and feelings through speech, writing, or other forms of expression.

Culture

The shared beliefs, customs, arts, and institutions of a community, transmitted through generations.