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Reference no: EM132999353

ABC bank has issued a one-year loan commitment of $ 20 MM for an upfront fee of 0.5%.

Fees on any unused portion of the loan is 0.25%.

The bank has a cost of funds of 7% and will charge an interest rate of 9%.

At the end of 6 months, there would be a drawdown of 50% of the committed amount followed by another 30% three months later.

Q1: The total cost of the loan ( interest plus fees combined ) over the committed duration is:

a-$ 709,230

b. $ 726,730

c. $ 738,420

d. $ 714,000

e. $ 692,000

Q2: The annual return of this loan commitment over this one-year period is:

a. 8.5 %

b. 9.5 %

c. 10.4 %

d. 10.7%

e. 11.2 %

Reference no: EM132999353

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