Question

You have approached your local bank for a start-up loan commitment for $360,000 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 = $360,000, term = one year, up-front fee = 25 basis points, back-end fee = 40 basis points, and rate on the loan = 8 percent. Assume you immediately take down $161,000 and no more during the year. Calculate the total interest and fees you will pay on this loan commitment.

Answer #1

25 basis points means 0.25% and 40 basis points would be 0.40%. The upfront fee is paid on the whole amount of loan (whether used or unused). Backend fee is computed on the unused portion of the loan and the interest on loan would be computed on the used portion.

Used Portion of loan = $161,000

Unused portion of loan = $360,000 - $161,000 = $199,000

Particulars | Amount |

Upfront Fee | $360,000 x 0.25% = $900 |

Backend Fee | $199,000 x 0.40% = $796 |

Interest on loan | $161,000 x 8% = 12,880 |

Total Interest and Fees |
$14,576 |

Casey’s One Stop has been approved for a $267,500 loan
commitment from its local bank. The bank has offered the following
terms: term = one year, up-front fee = 65 basis points, back-end
fee = 30 basis points, and rate on the loan = 7.00 percent. Casey’s
expects to immediately take down $256,000 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...

Question 2. You have approached Commonwealth Bank for a loan to
buy a house. The bank offers you a $500 000 loan, repayable in
equal monthly instalments at the end of each month for the next 30
years. Required: a. If the interest rate on the loan is 4.5% per
annum, compounded monthly, what is your monthly repayment (to the
nearest dollar)? b. What is your weekly payment if you wish to pay
weekly instalments and the interest rate is...

You own Howl Coffee Inc., and just decided to open up a new
store in Riverside, CA. This will cost around $200,000 and you have
$0 in your business account!
However, three banks you have visited are willing to give you
the $200,000 loan to fund the Riverside store. CSUSB Bank is
offering you a $200,000 loan at 8.7% simple interest (no
compounding). Bank of Riverside has offered you a $200,000 loan at
8.5% compounded daily (assume 365 days in...

You have approached Commonwealth Bank for a loan to buy a house.
The bank offers you a $500 000 loan, repayable in equal monthly
instalments at the end of each month for the next 30 years.
Required:
a. If the interest rate on the loan is 4.5% per annum, compounded
monthly, what is your monthly repayment (to the nearest
dollar)?
b. What is your weekly payment if you wish to pay weekly
instalments and the interest rate is compounding weekly?...

Up-Front Bank uses discount loans for all its customers who
want one-year loans. Currently, the bank is providing one-year
discount loans at 7.9%.
a) What is the effective annual rate on these loans?
b) If you were required to repay $210,000 at the end of the loan
for one year, how much would the bank have given you at the start
of the loan?

As a small software developer firm, you have approached the AXZ
Bank to obtain a term loan so that the firm can purchase a new
server. The AXZ bank provides two (2) offers to your company, as
listed below: a) a loan of $100,000 over a five (5) year period at
an interest rate of 7.65% per annum (per year) payable at the end
of each month. b) a loan of $100, 000 over a three (3) year period
at...

PLEASE SHOW WORK IN EXCEL* A bank owned “fixer-upper” property
is selling for $500,000. You are considering purchasing the
property from the bank, and have run the following estimates:
Lawyer and broker fees to purchase: $22,000 Monthly repair and
maintenance for the first year: $5000 Monthly repair and
maintenance after the first year: $700 The bank wants to get rid of
the property soon, so they are offering a seller financed 90% LTV
interest only loan at a 5.5% rate,...

Equity investors have contributed $250,000 to your start-up
business, while creditors provided a loan of $300,000. You have
calculated your firm's WACC at 10 percent. The annual interest
payment is $25,000 and the marginal corporate tax rate is 35
percent. Equity holders earned $38,750 in profit at the end of the
year.
Calculate EVA using both methods. Explain your EVA answer.

Equity investors have contributed
$250,000 to your start-up business, while creditors provided a loan
of $300,000. You have calculated your firm's WACC at 10 percent.
The annual interest payment is $25,000 and the marginal corporate
tax rate is 35 percent. Equity holders earned $38,750 in profit at
the end of the year.
Calculate EVA using both methods.
Explain your EVA answer.

Your firm's bank has offered you two options for short-term
financing in the amount of $500,000. The first option is a
committed line of credit with a commitment fee of 0.4% (EAR) and
an interest rate of 8% (APR, compounded quarterly). The second
option is a loan with a 3% compensating balance and an interest
rate of 7.6% (APR, compounded quarterly). If you need $485,000 in
financing at the beginning of the year and plan to pay it back at...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 50 seconds ago

asked 9 minutes ago

asked 21 minutes ago

asked 25 minutes ago

asked 27 minutes ago

asked 32 minutes ago

asked 39 minutes ago

asked 47 minutes ago

asked 50 minutes ago

asked 53 minutes ago

asked 1 hour ago

asked 1 hour ago