We appreciate your visit to Bun Bank has issued a one year 20 million loan commitment to a customer with the following terms Up front fee 15 basis points Base. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
The dollar income on the loan at the end of the year, if 70% of the loan is drawn, is $1,415,620. Therefore, the correct option is a.
To calculate the dollar income on the loan, we need to consider the various components involved. The loan amount is $20 million, and 70% of it is drawn, which amounts to $14 million. The up-front fee for the loan is 15 basis points, so the bank receives $14 million * 0.15% = $21,000 as an up-front fee.
The interest income is calculated based on the base rate of 10.5% plus the risk premium of 0.50%. The total interest rate is 11%. Therefore, the interest income on the drawn amount is $14 million * 11% = $1,540,000.
The back-end fee for the unused portion of the commitment is 10 basis points, which amounts to $20 million * 0.10% = $20,000.
The bank also requires a 10% compensating balance, which is $14 million * 10% = $1,400,000.
Finally, we need to calculate the reserve requirements on demand deposits, which is 15% of the drawn amount, or $14 million * 15% = $2,100,000.
To estimate the dollar income on the loan at the end of the year, we need to subtract the compensating balance and the reserve requirements from the interest income and up-front fee. Therefore, the dollar income on the loan is $1,540,000 + $21,000 - $1,400,000 - $2,100,000 = $1,415,620.
In conclusion, the dollar income on the loan at the end of the year, if 70% of the loan is drawn, is $1,415,620.
Know more about dollar income, here:
https://brainly.com/question/34211440
#SPJ11
Thanks for taking the time to read Bun Bank has issued a one year 20 million loan commitment to a customer with the following terms Up front fee 15 basis points Base. We hope the insights shared have been valuable and enhanced your understanding of the topic. Don�t hesitate to browse our website for more informative and engaging content!
- Why do Businesses Exist Why does Starbucks Exist What Service does Starbucks Provide Really what is their product.
- The pattern of numbers below is an arithmetic sequence tex 14 24 34 44 54 ldots tex Which statement describes the recursive function used to..
- Morgan felt the need to streamline Edison Electric What changes did Morgan make.
Rewritten by : Barada
