the equity investment is 100,000,000 (senior preferred stock) with dividend rate of 5%
now that equity investment becomes instead a loan of 100,000,000
_ _ _ _
F and F paid 5,000,000 in dividends in year one on the investment
as a loan to F and F the interest owed in year one is 5% or the same $5,000,000
how does the principal get reduced and amortized - as the amount (the 100,000,000) stays the same and the dividend rate is set at the interest rate = 5%
a payment of 5,000,000 would be all interest
no ?
if I did an amortization table at 5% - then to reduce principal the payments to the GOV in year one would have to exceed the money actually paid as pure dividends - where 5% = 5% - there would have had to be a payment in excess of 5,000,000 or an interest rate on the loan of say 4.9% ....
now - later - when F and F paid more than 5% after the NWS - then the principal is attacked big time and then interest owed on the "remaining balance of a declining balance loan" will indeed chip away and then erode the principal
but until there is a year with money paid - in this example greater than 5,000,000 - it is all interest ... I think
(e.g. a mortgage at 5% has a payment amount that is a tad more than 5% so that one can be paying the 5% interest owed on nearly the full owed amount in year one and still attack the principal - a bit because the amount due is not 5% x the mortgage borrowed.
If this link works - here is a 100,000 dollar loan - 30 years - 5% the lowest monthly is 456.05 or 5,472.6 --- it has to be higher than 100,000 x .05 or one never attacks the principal
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