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The point at which the holders of the certificates will receive nothing and below which the holders of the C-rated loan notes will not receive their full income will be an annual income of $18·83 million (a return of 9·4%), which is 14·4% less than the income that the non-executive director has forecast.
Why wouldn’t the holders of C-rated loan notes receive their full income if annual income is $18.83m? And how is 14.4% calculated?
For the C-rated loan notes to get their full income, the total available needs to be 18.63 (as per the table in the answer). This is after the service charge of 0.20, so it needs income to be 18.83.
18.83 is 14.4% less than the 22.00 that has been forecast.
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