Solved Question: At 30 June 2017 PSC had a $5 million secured bank loan

Get premium Solution to all your Homework Assignments exclusively on writerkingdom. We have CFA/MBA writers to provide customized model answers to your every academic problem

Compare

Description

Question:

At 30 June 2017 PSC had a $5 million secured bank loan with a maturity of 30 June 2022 and an interest rate of 6% p.a. compounded quarterly. The scheduled repayments are $100,000 every three months with the initial $100,000 payment due on 30 June 2018 and the final $100,000 payment due on 30 June 2021. What is the amount of the final one-off repayment that is due on 30 June 2022 to fully pay off the loan?

Answer:

So in this question we need to find the PV of the payment using PV function on calculator.

Insert N = 3 x 4 = 12, I/Y = 6%/4, PMT = $100,000, Future Value = 0

=> Compute Present Value = $100,000(1 + PVAF,1.5%,12)

= $100,000(1 + 10.0711178)

= $100,000(11.0711178)

= $1,107,111.78

PVAF : present value of annuity factor

PMT : periodic deposit

Note: It is assumed that Periodic deposit (PMT) made at the beginning of each compound period

This is value on 30 June 2018. Its value in 2017 is

PV = FV / (1 + r)^n = 1,107,111.78 / (1 + 6%/4)^4 = $1,043,103.26

Value of outstanding loan = $5,000,000 – $1,043,103.26 = $3,956,896.74

Amount to be repaid in 2022 = PV x (1 + r)^n = 3,956,896.74 x (1 + 6%/4)^20 = $5,329,366.19

Reviews

There are no reviews yet.

Be the first to review “Solved Question: At 30 June 2017 PSC had a $5 million secured bank loan”

Your email address will not be published. Required fields are marked *