Calculating Fees on a Loan Commitment
You have approached your local bank for a start-up loan commitment for $1,120,000 needed to open a car repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $1,120,000, term = 1 year, up-front fee = 20 basis points, back-end fee = 50 basis points, and rate on the loan = 10%. If you immediately take down $870,000 and no more during the year, what is the total interest and fees you have paid on this loan commitment?