Problem:
Weiss Inc. arranged a $9,000,000revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 3.25% during the year.
Required:
Question: If the firm borrowed $6,000,000 immediately after the agreement was signed and repaid he loan at the end of one year, what was the total dollar annual cost of the revolver?
Note: Please provide equation and explain comprehensively and give step by step solution.