Question: Assume a bank makes a loan commitment to the value of $20m at a fixed interest rate of 10 per cent p.a. for a period

Assume a bank makes a loan commitment to the value of $20m at a fixed interest rate of 10 per cent p.a. for a period of one year. Assume the borrower only uses 50 per cent of the provided funds over the course of the year. If the bank charges a back-end fee of 0.5 per cent, what is the additional revenue the bank would generate?

a. $25 000

b. None, unless the loan is prepaid early.

c. $50000

d. None of the listed options is correct

e. $2500

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

1. Which of the following is correct? a. None of the other listed options are correct. b.While pass-throughs and CMOs remain on banks and building societies balance sheets, mortgage-backed bonds...

Assume a bank makes a loan commitment to the value of $20m stafeed Interest rate of 10 per cent B.a. for a period of one year. Assume the borrower only uses 50 per cent of the prodded and over the...

(b) Assume a bank makes a loan commitment to the value of $10 million at a fixed interest rate of 10% per annum for a period of one year and up-front fee of 40 basis points. Assume the borrower only...

Assume a bank makes a loan commitment to the value of $10 million at a fixed interest rate of 10% per annum for a period of one year. Assume the borrower only uses 50% of the provided funds over the...

(a)Briefly explain off-balance-sheet assets and off-balance-sheet liabilities with an appropriate non-market related OBS asset example. (2 marks) (b)Assume a bank makes a loan commitment to the value...

(a)Briefly explain off-balance-sheet assets and off-balance-sheet liabilities with an appropriate non-market related OBS liability example. (b)Assume a bank makes a loan commitment to the value of...

Da Silva plcs shares are not traded in any recognised market. Its sole activity is saloon car hire. It is financed by a combination of 2 million 0.50 ordinary shares and a 1.5m bank loan. Very...

32. Assume a bank grants a loan commitment at an interest rate of 10 per cent p.a. and the risk premium on the loan is 2 per cent. The bank charges borrowers an upfront fee on the whole commitment of...

QUESTION 2 "A bank makes a 30 year Fully Amortizing FRM for $1,000,000 at an annual interest rate of 4.13% compounded monthly, with monthly payments. What is the market value of this loan after 7...

Ratio analysiscompares the line-item data in a firm'sfinancial statements, which will reveal many understandings regarding liquidity, profitability, operational efficiency, and solvency.Moreover,...

The basis for this forum discussion is the U.S. Supreme Court case of Burwell v. Hobby Lobby Stores, Inc. , also the subject of your Case Brief Assignment. This case is about a business' leadership...

Commercial banks monetize claims when they sell securities to Federal Reserve Banks. Group startsTrue or False

Multiple Choice Question 182 Which of the following is not an intangible asset arising from government grant? a Goodwill Patent Trade name. Trademark. Click if you would like to Show Work for this...

3. The income elasticities of demand for movies, dental services, and clothing have been estimated to be +3.4, +1, and +0.5, respectively. Interpret these coefficients. What does it mean if an...

3. The problem with our democratic institutions is that they dont correctly reflect the will of the people! If the people rather than self-interested politicians or lobbyistshad control, we wouldnt...

2. Majority voting ensures that government will produce only those public goods for which benefits exceed costs. Discuss. LO5.3