2B5DD FRAME INDUSTRIES HAS ARRANGED A REVOLVING LINE OF CREDIT FOR TH...
185.
CSO: 2B5f
LOS: 2B5dd
Frame Industries has arranged a revolving line of credit for the upcoming year with a
commercial bank. The arrangement is for $20 million, with interest payable monthly on
the amount utilized at the bank’s prime rate and an annual commitment fee of one-half of
1 percent, computed and payable monthly on the unused portion of the line. Frame
estimates that the prime rate for the upcoming year will be 8%, and expects the following
average amount to be borrowed by quarter.
Quarter
Amount Borrowed
First
$10,000,000
Second
20,000,000
Third
20,000,000
Fourth
5,000,000
How much will Frame pay to the bank next year in interest and fees?
a.
$1,118,750.
b.
$1,131,250.
c.
$1,168,750.
d.
$1,200,000.