You have approached your local bank for a start-up loan commitment for $440,000

Question

You have approached your local bank for a start-up loan commitment for $440,000 needed to open a computer 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 = $440,000, term = one year, up-front fee = 60 basis points, back-end fee = 70 basis points, and rate on the loan = 7 percent. Assume you immediately take down $169,000 and no more during the year. Calculate the total interest and fees you will pay on this loan commitment. Total interest and fees $

Explanation / Answer

Total interest and fees payable = $ 16,367

Calculation of total interest and fees to be paid on the loan commitment

Up-front fee ($ 4,40,000 × 0.0060)             $ 2,640

Interest ($ 169,000 × 0.07)                         $ 11,830

Back-end fee ($ 271,000 × 0.0070)             $ 1,897

Total interest and fees payable                  $ 16,367

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

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