FIN250 Fundamentals Of Corporate Finance

Fundamentals Of Corporate FinanceTU Board 2077

Dabur Nepal wishes to borrow Rs 100,00 for one year from NBL. The annual interest rate of the loan is 10 percent. The interest is paid on a discount basis and 10 percent compensating.

2

Answer

To determine the amount Dabur Nepal will receive from NBL, we calculate the loan amount using the discount interest method with a compensating balance.

  1. Discount Interest Calculation: The interest is calculated on the face value of the loan:

  2. Compensating Balance: A 10% compensating balance is required:

  3. Amount Received: The total deduction from the face value includes both the discount interest and the compensating balance: The amount Dabur Nepal will receive is:

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