Commercial Loan Borrower’s Optimal Prepayment Decision by Using the Utility Function
碩士 === 銘傳大學 === 管理研究所 === 97 === Commercial loan borrowers meet random cash needs via three-period loans from the bank, but fluctuations in interest rates may justify paying off some outstanding loans before they mature. The objective is to minimize the expected present value of the interest and pre...
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| Format: | Others |
| Language: | zh-TW |
| Published: |
2009
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| Online Access: | http://ndltd.ncl.edu.tw/handle/y9qxed |
| Summary: | 碩士 === 銘傳大學 === 管理研究所 === 97 === Commercial loan borrowers meet random cash needs via three-period loans from the bank, but fluctuations in interest rates may justify paying off some outstanding loans before they mature. The objective is to minimize the expected present value of the interest and prepayment penalties paid to the bank subject to a liquidity constraint. It is shown that a firm should not inventory cash if contingent opportunities are ignored. Also, if a borrower is not risk neutral, a more risk-averse borrower prepays a larger amount.
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