Calculating Fees on a Loan Commitment You have approached your local bank for a

Question

Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $1,070,000 needed to open a car 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 = $1,070,000, term = 1 year, up-front fee = 25 basis points, back-end fee = 60 basis points, and rate on the loan = 10%. If you immediately take down $820,000 and no more during the year, what is the total interest and fees you have paid on this loan commitment?

Explanation / Answer

Upfront fee : $1,070,000 × .0025 = $2675
Interest : $820,000 × 10% = $82000
Back end fee : $250,000 × .0060 = $1500

Total interest and fee : $86175

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.