AI

CFA Level II
#1

so when we need to calculate the after tax cash flow… we have a 2 step process… 1- get taxes payable. noi - int - dep) x tax rate… 2-- then get the actual cash flow. noi - debt service - taxes my question is the debt service… does that mean your whole pmt on the loan?

#2

I think it’s the year’s payment toward the loan - interest and principal - your typical real life mortgage payment. But generally, the question is going to involve an interest only loan.

#3

so when its an interest only loan than the int and debt service are the same?

#4

nope…I would think the interest could be on other types of debt…like another loan, notes payable etc… the debt service is specifically the payment towards your mortgage… look for hints in the question where you are payin interest other than that on the mortgage

#5

ok… so debt service = int on mortgage + mortgage pmt got it…

#6

but if you pay interest on other things besides your mortgage then you dont deduct that frm noi to get takes payable do you>?

#7

hey nikko, can you have a look at page 576 no 5 of cfa volume 4. I dont think the interest is included. I think it is the prinicipal reparyment that amortizes the loan. can you please confirm? In the meantime i will check another source.

#8

it is the principal repayment of the debt that you have. so interest is not included.

#9

can someone confirm this one please? it is confusing. thanks

#10

I believe I read this a while ago. The exam will give you a loan amorization schedule for the debt service because we do NOT need to be able to construct an amortization table. If the schedule is not given, the loan is interest only.

#11

so if are given a loan amm schedule all we do is add the int and prin and thats our debt service pmt… thanks

#12

This is important, so let’s get it right. Debt service includes every cent going out the door to service your debt. It DOES include interest, and it DOES include principle. If it’s an interest only loan, then interest exp and debt service are the same. If my mortgage is $3000/month, that’s my monthly debt service. It includes (unfortunely for me) about $2999 in interest and $1 in principle.

#13

And if ‘Wait for the FED to cover your ass’ is an option, would you pick it?

#14

Posted by: wonder2008 (IP Logged) [hide posts from this user] Date: May 28, 2008 04:40AM hey nikko, can you have a look at page 576 no 5 of cfa volume 4. I dont think the interest is included. I think it is the prinicipal reparyment that amortizes the loan. can you please confirm? In the meantime i will check another source. Smarshy where did you read it please? there is an example as per above.

#15

Smarshy is simply 100% right on this one. And without any sexual references… That’s style people

#16

I remember this because when I was in high school, my principle was really hot. I had INTEREST in my PRINCIPLE SERVICING me.

#17

Oh, also this: Definition of Debt Service on Investopedia - Cash required over a given period for the repayment of interest and principal on a debt

#18

Smarshy Wrote: ------------------------------------------------------- > I remember this because when I was in high school, > my principle was really hot. I had INTEREST in my > PRINCIPLE SERVICING me. Dude, Skinner? Troubling! http://www.thesimpsonsquotes.com/images/skinnerpointing.gif

#19

Actually, Mrs. Krabappel was my principle.

#20

dude