Question

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 loan commitment. |

Total interest and fees |
$ |

Answer #1

**Answer**

*Interest is charged only on amount of loan that is
utilised. On the remaining portion bank charges Commitment
Charges.*

**
Amount of Interest to be paid {assuming Annual Compounding} = Loan
Utilised * Rate of Interest**

**= $ 256000 *
0.07**

**= $ 17920**

**Amount of Fees
to be Charged by Bank :**

**UPFRONT FEE = (Amount of Loan Sanctioned * Upfront fee Rate)**

**?= $ 267500 *
0.65%**

**= $ 1738.75**

**BACKEND FEE =****(Amount of Loan Sanctioned * Backend fee Rate)**

**?****= $ 267500
* 0.30%**

**= $ 802.5**

**Total
Fees = $ 1738.75 (+) $ 802.5**

**= $ 2541.25**

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