The formula for effective maturity.
Suppose that an installment plan also shows additional borrowings of a debtor. That is, at some point in time (other than the inception date) the borrower is given a fixed amount for once or several times before the maturity.
To illustrate (assume that the inception date is the first day of 2023):
| Date | Payment/Loan | Payment/Loan Amount | Outstanding Balance |
|---|---|---|---|
| 01-01-2024 | P | 10 | X |
| 01-01-2025 | P | 10 | X-10 |
| 01-01-2026 | L | 20 | X+10 |
| 01-01-2027 | P | 13 | X-3 |
| 01-01-2028 | P | 13 | X-16 |
| . | . | . | . |
| . | . | . | . |
In that case, should the additional loans be taken into account as negative cash flows while calculating the effective maturity of the loan? That is;
or not
