Report to the Congress On the Tax Treatment of Bad Debts By Financial Institutions
The book Report to the Congress On the Tax Treatment of Bad Debts By Financial Institutions was written by author United States. Dept. of the Treasury Here you can read free online of Report to the Congress On the Tax Treatment of Bad Debts By Financial Institutions book, rate and share your impressions in comments. If you don't know what to write, just answer the question: Why is Report to the Congress On the Tax Treatment of Bad Debts By Financial Institutions a good or bad book?
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This discount rate usually is not the contract rate of interest.^ The value of a loan contract in any period during the life of the loan may differ from the value implied by the stated terms of the contract at the time of origination because of the possibility that those terms may not be fully satisfied. The borrower may default on the loan, producing a loss for the lender that reduces the implied value of the contract.^' Because the lender recognizes the possibility of borrower default when he... makes the loan, the terms of the lender's cash advance to the borrower will take into account the lender's expectation of future losses. A common method of pricing a contract to account for a lender's expected loan losses is to compute for a given nominal principal a contract interest rate that incorporates a "risk premium. " The addition of the risk premium yields a discounted present value for the contract's expected future payments that is equal to the nominal principal. This approach builds a cushion into the contractual payment stream to absorb the expected losses.
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