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? (use 2 decimals)

A. $50 000

B. $100 000

C. None, since the customer is paying 10% interest of this loan

D. $200 000

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...

Wendy inherited a beach house in North Carolina (rental only) on January 2, 2020, from her father. The FMV at the fathers death was $850,000. He had purchased the house 20 years earlier for $100,000....

Develop a Fish-bone diagram for the Turk Kizilayi case The case: Trk Kzlay (Turkish Red Crescent) is the largest blood-product supplier in the country. All blood collected by Kzlay is from volunteer...

What is the difference between departmental and consolidated income statements?

Adams Acrobats lent $48,868 to Donaldson, Inc., accepting Donaldson's 2-year, $57,000, zero-interest-bearing note. The implied interest rate is 8%. Prepare Aldams's journal entries for the initial...