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The Analysis Of Total Compensation Of The Increase In Installments Of The Loan With Currency Clause By Extending Payment Period

Author

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  • Drago Franciskovic

    (Medjimurje University of Applied Sciences in Cakovec)

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.

Suggested Citation

  • Drago Franciskovic, 2011. "The Analysis Of Total Compensation Of The Increase In Installments Of The Loan With Currency Clause By Extending Payment Period," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 20(2), pages 313-334, december.
    • Handle: RePEc:avo:emipdu:v:20:y:2011:i:2:p:313-334
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    File URL: https://hrcak.srce.hr/clanak/112245
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    More about this item

    Keywords

    annuity; instalment; loan; foreign currency clause; loan with a currency clause; compensation; increase in annuity; rate of extension of repayment period;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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