Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $500,000 needed to open a furniture repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $500,000, term = 1 year, up-front fee = 30 basis points, back-end fee = 60 basis points, and rate on the loan = 10%. If you immediately take down $250,000 and no more during the year, what is the total interest and fees you have paid on this loan commitment?
A) $27,250
B) $28,000
C) $29,500
D) $53,000

Question

Quizplus · Accepted Answer

- Up-front fee: $500,000 x 0.30% = $1,500
- Back-end fee: $250,000 x 0.60% = $1,500
- Interest on $250,000 for one year at 10% = $25,000
- Total fees and interest = $1,500 + $1,500 + $25,000 = $28,000

Calculating Fees on a Loan Commitment You Have Approached Your