- 33 -
percent financing when GMAC's buy rate for a 4-year loan was 12
percent. The monthly payment due on the rate-supported RISC was
$244, and the fair market value of the rate-supported RISC at the
time of purchase was $9,253.23 Even though the rate-supported
RISC was worth only $9,253, GMAC paid the independent GM dealer
$10,000. GM paid GMAC a retail rate support payment in the
amount of $747--the difference between the $10,000 face value of
the rate-supported RISC and the $9,253 fair market value of the
rate-supported RISC at the time of its purchase.
2. 1985 and Post-1985
In 1985 and thereafter, GM's retail rate support payment was
adjusted (reduced) for the actuarially determined retail customer
prepayments. During 1985, GM reduced the retail rate support
payments it made to GMAC by 7 percent to take account of
anticipated prepayments. Thus, given the same facts as above for
pre-1985, in 1985, the retail rate support payment of $747 would
have been reduced to $695.
C. GM and GMAC Financial Accounting
1. Rate-Supported RISC
Suppose a retail customer's RISC had a face amount of
$10,000, below-market stated interest of $2,000 to be paid by the
customer over the term of the RISC, and a fair market value of
23 The $9,253 figure is arrived at by discounting to
present value the 48 monthly payments of $244 by 12 percent.
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