Calculate the total fees a firm would have to pay when its bank offers the firm the following loan commitment: A loan commitment of $1,500,000 with an up-front fee of 95 basis points and a back-end fee of 25 basis points. The take-down on the loan is 50 percent.
A) $15,550
B) $16,125
C) $18,125
D) $15,955

Question

Quizplus · Accepted Answer

The total fees include the up-front fee and the back-end fee. The up-front fee is 95 basis points of the total commitment, which is 0.95% of $1,500,000 = $14,250. The back-end fee is 25 basis points of the take-down amount, which is 0.25% of 50% of $1,500,000 = $1,875. Adding these together gives $14,250 + $1,875 = $16,125.

Calculate the Total Fees a Firm Would Have to Pay