R
rajiv_p_lk_2001
Member
This is a standard question with Capital Gains Test. But can some one explain why do we assume the the loan is redeemed as late as possible?
Given that the redemption is at the option of the borrower. Why cannot we use the earliest redemption date? I know this would give the maxmium price for the borrower, but the question does not mention if its maximum or minimum price. It only states a minimum return of 4% p.a.
Working with a term of 15 years we can still calculate a price which would give the minimum effective yield of 4%.
Can anyone please explain if I am wrong? Or is it correct to use either term?
Given that the redemption is at the option of the borrower. Why cannot we use the earliest redemption date? I know this would give the maxmium price for the borrower, but the question does not mention if its maximum or minimum price. It only states a minimum return of 4% p.a.
Working with a term of 15 years we can still calculate a price which would give the minimum effective yield of 4%.
Can anyone please explain if I am wrong? Or is it correct to use either term?