Smith Enterprise Credit line (w/o comp)
Smith Enterprise has an one year credit line of $5,000,000 with Second Bank. On average Smith uses $3,250,000 of the credit line. Second Bank charges a .45% commitment fee on the unused portion of the line and the interest rate is set at LIBOR +1.5%. Assume that the LIBOR is 6.3%

-Refer to Smith Enterprise Credit line (w/o comp).What would be the effective borrowing rate if you exhausted your line of credit?

Question

Smith Enterprise Credit line (w/o comp)
Smith Enterprise has an one year credit line of $5,000,000 with Second Bank. On average Smith uses $3,250,000 of the credit line. Second Bank charges a .45% commitment fee on the unused portion of the line and the interest rate is set at LIBOR +1.5%. Assume that the LIBOR is 6.3%

-Refer to Smith Enterprise Credit line (w/o comp).What would be the effective borrowing rate if you exhausted your line of credit?

Quizplus · Accepted Answer

{.078´5000000+(.0045(5000000-5000000)}/5000000 ´ 365/365 = .078

Smith Enterprise Credit Line (W/o Comp)