Professional Documents
Culture Documents
Act 16
Act 16
Under the
loan agreement, the effective interest rate is 10% and that D Company is to pay the
annual interest every December 31. The principal amount of the loan is due on
December 31, 2023.
On December 31, 2019, Zoom Bank needs to measure the 12-month expected
credit loss from the loan. Zoom Bank determined that the probability of the loan being in
default over 12 months is 2% and that 20% of the gross carrying amount will be lost
over the terms of the loan (i.e., Loss Given Default or LGD is 20%).