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Discounting of loan with no fixed repayment ter

06. Jun 2013
1

Hi, I would like some guidance on how to go about discounting a loan with no fixed repayment term (repayments are based on future dividend payments- these can be estimated using certain assumptions). The interest rate is linked to the prime interest rate. Can anyone assit with how to go about calculating this?

Submitted by Mladek on Thu, 06/06/2013 - 13:01

Can you provide some additional details?

What is the nature of the loan?  What was it for?  Who's dividends (the debtor's or someone else's)?

In any event, if you can estimate the probabilities of the amounts and timings of the repayments, you can calculate present value using a risk adjusted cash flow method.

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