## Mock test 2

AMITAG1990
Finance Junkie
Posts: 89
Joined: Sat Sep 22, 2012 12:35 pm

### Mock test 2

A Multi Year Restructuring Agreement for a \$300 million loan with a sovereign has the following features:

Maturity extended to five years
Principal amortization for four years at 25% per year
Grace period of 1 year
Up-front fee = 1.5%
New loan rate = 6%
Bank’s discount rate = 8%

If the original loan had a value of \$306 million, the concessionality attached to this MYRA is closest to:
a. \$18.99 million Correct
b. \$15.68 million Incorrect
c. \$17.43 million Incorrect
d. None of these Incorrect
The correct answer is \$18.99 million.

Present value of restructured loan = \$300 * 0.015 + [\$0 + \$300*(0.06)] / 1.08 + [\$75 + \$300*(0.06)] / 1.082 + [\$75 + \$225*(0.06)] / 1.083 + [\$75 + \$150*(0.06)] / 1.084 + [\$75 + \$75*(0.06)] / 1.085 = 287.01 million
Therefore, concessionality = 306 – 287.01 = \$18.99 million
Hence option ‘A’ is correct.

Please explain this, i just cann't understand why new loan rate is applying every year.. It should be just 1 time income.

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