Question

please answer the following questins and show all work, thank you!

A $300 million loan commitment has an up-front fee of 25 basis points and a back-end fee of 15 basis points on the unused portion. 1. The up-front fee is 2. If 50 % of the commitment is taken down, the back-end fee is 3. If 25 % of the commitment is taken down, the total fees are 4. If 75 % of the commitment is taken down, what is the bank's rate of return on the line of credit

Answer 1

Up Front Fee Loan amount* Fee in basis point $300,000,000 0.0025 - $750,000 2. Back End Fee 50% of the commitment * Fee in basis point $150,000,000 * 0.0015 - $225,000 Working note- 50% of the commitment-$300,000,000 * 0.50 $150,000,000

3. Up Front Fee-25% of the commitment * Fee in basis point Back End Fee 25% of the commitment * Fee in basis point Up Front Fee $75,000,000 0.0025 $187,500 Back End Fee- S75,000,000 *0.0015 $112,500 Total Fee $300,000 Working note- 25% of the commitment: $300,000,000 * 0.25--$75,000,000