Loan help needed

Barry
Barry Registered Posts: 101 ? ? ?
Please can someone help with this problem:
10 year loan at 10% interest for £200,000 is taken out on 1/1/07 and interest is paid half yearly. Costs of issue are £14k. It is repurchased on 2/1/12 at £102 per £100 face value and the client has used straight line of amortisation. I am trying to work out the gain or loss on the repurchase of the loan. Any takers??

Comments

  • Steve Collings
    Steve Collings Registered Posts: 997
    Is this a real-life situation?

    Anyhow, to work out the gain/loss, here's what you do:

    Reacquisition price [(102/100) x £200k]...............................204,000
    Face value........................................................200,000
    Unamortised discount [2% x £200k x (6/10)]..........(2,400)
    Unamortised issue cost [14,400 x (6/10)]...............(8,400)....189,200
    Loss on repurchase..............................................................14,800

    Hope that helps.

    Regards
    Steve
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