THE ANALYSIS OF TOTAL COMPENSATION OF THE INCREASE IN INSTALLMENTS OF THE LOAN WITH CURRENCY CLAUSE BY EXTENDING PAYMENT PERIOD

Drago Franciskovic ()
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Drago Franciskovic: Medjimurje University of Applied Sciences in Cakovec

Economic Thought and Practice, 2011, vol. 20, issue 2, 313-334

Abstract: This paper studies the instalment of loan with a currency clause, in the case of increasing instalment, due to the increasing value of the currency. Extended repayment period, at which the increase of the instalment is compensated, is derived. The paper derived the functional relationships between such extended repayment period, annual interest rate, the rate of increase of instalment and current repayment period. The paper analyses the relationships between these quantities and presents conclusions related to compensation of increased instalment by extending repayment period. Threshold value of these quantities, above which compensation is not possible, is presented. The rate of extending repayment period is also defines, and easily computable formula for its lower bound is derived.

Keywords: annuity; instalment; loan; foreign currency clause; loan with a currency clause; compensation; increase in annuity; rate of extension of repayment period (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
Date: 2011
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