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:

Merging

The process of combining two or more entities into a single entity, often seen in corporate or organizational contexts.

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Limited Access

Restrictions or barriers that prevent or reduce the ability to use, obtain, or reach something.

Healthcare

The organized provision of medical care to individuals or a community through services offered by professionals in the medical, nursing, and allied health professions.