Compared with an amortised loan,a deferred repayment loan involves:
A) periodic interest and principal repayments.
B) periodic interest and principal repayments when positive cash flows begin.
C) periodic interest payments and principal repaid at maturity.
D) periodic principal payments and interest repaid at maturity.

Question

Quizplus · Accepted Answer

A deferred repayment loan differs from an amortised loan in that the repayments do not begin immediately. Instead, the borrower defers repayment until a later date, usually when they expect to have positive cash flows. This means that the borrower will usually only make periodic interest payments until the deferred repayment period ends, at which point they will begin making periodic principal and interest repayments as with an amortised loan. Therefore, choice B is the correct answer.

Compared with an Amortised Loan,a Deferred Repayment Loan Involves