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What is the amortized cost of the instrument on december

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Question - On January 2, 2018, Estrella Company originates a 10-year 7% P4,000,000. The loan carries an annual interest rate of 7% and is payable at the end of year 10 (December 31, 2027). Estrella charges a 1.25% nonrefundable loan origination fee to the borrower and also incurs P100,000 in direct origination costs. The contract specifies that the borrower has an option to pre-pay the instrument at approximately equal to instrument's amortized cost at each exercise date, and that no penalty will be charged for prepayment. But at the inception of the contract, Estrella expects the borrower not to pre-pay, the amortization period is equal to the instrument's full term and for that reason, the effective yield rate is determined at 6.823%. What is the amortized cost of the instrument on December 31, 2019?

Reference no: EM133171242

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