You have approached your local bank for a start-up loan commitment for $390,000

Question

You have approached your local bank for a start-up loan commitment for $390,000 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 = $390,000, term = one year, up-front fee = 25 basis points, back-end fee = 45 basis points, and rate on the loan = 9 percent. Assume you immediately take down $164,000 and no more during the year.

Calculate the total interest and fees you will pay on this loan commitment.

Total Interest and fees ___ $

You have approached your local bank for a start-up loan commitment for $390,000 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 = $390,000, term = one year, up-front fee = 25 basis points, back-end fee = 45 basis points, and rate on the loan = 9 percent. Assume you immediately take down $164,000 and no more during the year.

Explanation / Answer

Answer:

Upfront fees = $ 3,90,000 * 0.0025 = 975

Interest = $164,000 * 9/100 = 14760

Back end Fees= 2,26,000 * 0.0045 = 1017

So, Total Interest & Fees = $ 975 + 14760 + 1017 = $ 16,752

Thanks

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