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

## 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?

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

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