A Firm Has a Committed Line of Credit with a Maximum

Multiple Choice

A firm has a committed line of credit with a maximum of $10 million and an interest rate of 8.5% (EAR) with a certain bank. The commitment fee is 0.5% (EAR) . The firm borrows $2 million at the start of the year and then repays it at the end of the year. What is the total cost of the loan?

A) $520,000
B) $680,000
C) $210,000
D) $720,000