This is my second time posting this question because the first one was answered

Question

This is my second time posting this question because the first one was answered incorrectly. The answer is not "so total Fee $1300 and total interest payable is $9750." Thank you in advance.

Casey’s One Stop has been approved for a $137,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 75 basis points, back-end fee = 25 basis points, and rate on the loan = 7.50 percent. Casey’s expects to immediately take down $130,000 and no more during the year unless there is some unforeseen need.

Calculate the total interest and fees Casey’s One Stop can expect to pay on this loan commitment. (Round your answer to 2 decimal places.)

Casey’s One Stop has been approved for a $137,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 75 basis points, back-end fee = 25 basis points, and rate on the loan = 7.50 percent. Casey’s expects to immediately take down $130,000 and no more during the year unless there is some unforeseen need.

Explanation / Answer

The fees is calculated on the loan commitment

= (0.0075+0.0025)*(137500)

= 1375

Interest payable is calculated on disbursed amount

= 0.075*130000

= 9750

Total interest and fees = 1375+9750 = 11125

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