Calculating Fees on a Loan Commitment Calculate the total fees a firm would have to pay when its bank offers the firm the following loan commitment: A loan commitment of $5,000,000 with an up-front fee of 50 basis points and a back-end fee of 20 basis points.The take-down on the loan is 80 percent.
A)$10,000
B)$25,000
C)$27,000
D)$33,000

Question

Quizplus · Accepted Answer

The up-front fee is 50 basis points, which is 0.50%, so the firm would have to pay:

$5,000,000 x 0.50% = $25,000

The back-end fee is 20 basis points, which is 0.20%, so the firm would have to pay this fee on the remaining 20% of the loan amount:

$5,000,000 x 20% x 0.20% = $2,000

Therefore, the total fees the firm would have to pay would be:

$25,000 + $2,000 = $27,000

So the answer is choice C.

Calculating Fees on a Loan Commitment Calculate the Total Fees