A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion.

If 50 percent of the commitment is taken down,the back-end fee is
A)$250,000.
B)$4,000,000.
C)$400,000.
D)$775,000.

Question

A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion.

If 50 percent of the commitment is taken down,the back-end fee is
A)$250,000.
B)$4,000,000.
C)$400,000.
D)$775,000.

Quizplus · Accepted Answer

The back-end fee is calculated on the unused portion of the loan. If 50% of the $200 million commitment is taken down, then $100 million is unused. The back-end fee is 25 basis points (0.25%) of the unused $100 million, which is $250,000.

A $200 Million Loan Commitment Has an Up-Front Fee of 20