CMA Final · Strategic Financial Management · Securitization
A pool has Rs 200 crore of loans with weighted average maturity of 4 years. Scheduled annual principal repayment is Rs 50 crore. Under an assumed prepayment, an extra Rs 20 crore is repaid at the end of year 1 over and above the scheduled amount. Interest is 10% p.a. on opening balance, paid at year end. What is the total interest collected in year 2, in Rs crore?
Interest collected in year 2 is Rs 13 crore. Year-1 repayments of Rs 50 crore scheduled plus Rs 20 crore prepaid reduce the balance from Rs 200 crore to Rs 130 crore, and 10% of that opening balance is Rs 13 crore.
- A15.0
- B13.0Correct
- C12.0
- D17.0
Explanation
Opening balance of year 1 is 200. At end of year 1, repayments are 50 scheduled plus 20 prepayment = 70, giving opening balance of year 2 of 130. Interest in year 2 = 10% x 130 = 13.0. Option 15 ignores the prepayment (150 x 10%).
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