Question: You have approached your local bank for a start up loan
You have approached your local bank for a start-up loan commitment for $250,000 needed to open a computer 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 = $250,000, term = one year, up-front fee = 50 basis points, back-end fee = 75 basis points, and rate on the loan = 8 percent. If you immediately take down $150,000 and no more during the year, calculate the total interest and fees you will pay on this loan commitment.
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