Question

Help Save &Et Calculating Fees on a Loan Commitment During the last year you have had a loan commitment from your bank to fund inventory purchases for your smal business. The total loan avalable was St060000 of which you took down $830.000. it is now the end of the loan commtment period and your bankis aking you to pay the backend fees You have msplaced the paperwork that isted the terms of the commitment, but you know you paid total fees his does not include any interest paid to bomow the S0.000) of S4.865 on ths loan commment You remember that the up tront fee was 30 bass pores what is the backend fee on this loan commitment Multiple Choice 3.5 basis points 65 besis points 65 bes points 25 besis points

Answer 1

Up-front fee = Loan size × fee in basis points
= $1,080,000 * 0.0030
= $3,240

Back-end fee = Total Fees paid - Up-front fees
= $4,865 - $3,240
= $1,625

Back-end fee = ($1,080,000 - $830,000) * Fee percentage = $1,625
Fee percentage = $1,625 / 250,000 = 0.0065 or 65 basis point

Back-end fee on this loan commitment = 65 basis point