Which of the following is true of commitment fees?
A)Commitment fees are in the neighborhood of one quarter of 1% per year.
B)Commitment fees are approximately three-fourth of 1% per year.
C)Commitment fees are usually half of the risk-free rate.
D)Commitment fees are in the neighborhood of the risk-free rate.

Question

Quizplus · Accepted Answer

Commitment fees are generally in the range of one quarter of 1% per year. This fee is charged by lenders to keep a line of credit or loan available to the borrower, even if the borrower doesn't draw down on it. The fee compensates the lender for tying up capital that could be deployed elsewhere.

Which of the Following Is True of Commitment Fees