saikrishna123 wrote:
How come repayment amount ( SUM OF ALL PAYMENTS) is 1n?? Explanation very confusing. Can anyone help?
If you check the actual meaning of loan proceeds, then u can understand the answer
Loan proceeds: The net amount of money that a lender disburses for a loan.
Example: A borrower agreed to a $100,000 mortgage loan. The lender charged 1% for origination and a 1% discount, providing $98,000 of loan proceeds.
Here 80% of collateral or loan amount = n or 1n
discount = .15n (15% of loan amount)
so actual amount given for loan or Loan proceeds = .85n (1n-.15n)
Actual repayement amount is = 1n or n only
There is no rate of interest here.
Taking example:
The deal here is that company gives loan of say $1000 but actually company will be giving you $850 and in return u will be repaying company $1000 ($150 is ur interest amount)
PS: Is this problem from IR prep tool? If yes then can you provide the feedback of it.