Casey’s One Stop has been approved for a $167,500 loan commitment from its local
ID: 2617366 • Letter: C
Question
Casey’s One Stop has been approved for a $167,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 60 basis points, back-end fee = 25 basis points, and rate on the loan = 6.25 percent. Casey’s expects to immediately take down $163,000 and no more during the year unless there is some unforeseen need.
Calculate the total interest and fees Casey’s One Stop can expect to pay on this loan commitment. (Round your answer to 2 decimal places.)
Casey’s One Stop has been approved for a $167,500 loan commitment from its local bank. The bank has offered the following terms: term = one year, up-front fee = 60 basis points, back-end fee = 25 basis points, and rate on the loan = 6.25 percent. Casey’s expects to immediately take down $163,000 and no more during the year unless there is some unforeseen need.
Explanation / Answer
Upfront fee = .006 * 167500 = $1005
Interest = 6.25% of 163000 = $10187.5
Back end fee = .25% 0f *(167500 - 163000) = $11.25
So total interest and fees = $1005 + $10187.5 + $11.25 = $11203.75