The company arranged a line of credit for $500,000 on January 1. The commitment fee is 0.05%
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The company arranged a line of credit for $500,000 on January 1. The commitment fee is 0.05% (five one-hundredths of 1%) of the total credit line. In addition, the company must pay interest of 5.9% (compounded annually) on any actual loans acquired under the credit line arrangement. This year, the company borrowed $260,000 under the agreement on May 1; this loan was still outstanding at the end of the year. Compute the total cost of the credit line (including interest) for the year.
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
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Related Book For 
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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