Moderate Bank granted a loan to a borrower on January 1, 2019. The interest on the loan is 10% payable annually starting December 31, 2019. The loan matures in three years on December 31, 2021. After considering the origination fee received from the borrower and the direct origination cost incurred, the effective rate on the loan is 12%.
Principal amount |
5,000,000 |
Direct origination cost incurred |
100,000 |
Origination fee received from the borrower |
340,000 |
Indirect origination cost incurred |
50,000 |
What is the interest income for 2020?
How much is the amortization of unearned interest income in December 31, 2019?
What is the carrying amount of the loan receivable on December 31, 2020?
please answer with solution its for my quiz
Since the effective interest rate after considering all the cost have already been provided, we wont be including origination fee, direct origination cost in the computation.
First we will calculate the Present value of the loan as on 1 January, 2018.
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