Refactor loan repayment logic in Moolah SDK to clarify the use of normalizedDebt for debt calculations while ensuring the original principal is returned. Update tests to reflect these changes and improve accuracy in repayment computations.

Author: tyler-tsai

packages/moolah-sdk-core/CHANGELOG.md

@@ -1,5 +1,11 @@
 # @lista-dao/moolah-sdk-core
 
+## 1.0.12
+
+### Patch Changes
+
+- Refactor loan repayment logic in Moolah SDK to clarify the use of normalizedDebt for debt calculations while ensuring the original principal is returned. Update tests to reflect these changes and improve accuracy in repayment computations.
+
 ## 1.0.11
 
 ### Patch Changes

packages/moolah-sdk-core/package.json

@@ -1,6 +1,6 @@
 {
   "name": "@lista-dao/moolah-sdk-core",
-  "version": "1.0.11",
+  "version": "1.0.12",
   "type": "module",
   "main": "./dist/index.js",
   "module": "./dist/index.js",

packages/moolah-sdk-core/src/__tests__/loan.test.ts

@@ -87,14 +87,17 @@ describe("calculateDynamicLoanRepayment", () => {
     expect(result.interest.valueOf()).toBeGreaterThan(0);
   });
 
-  it("should use normalizedDebt if provided", () => {
+  it("should use normalizedDebt for debt calculation but return original principal", () => {
     const result = calculateDynamicLoanRepayment({
       principal: 1000n * DECIMAL_SCALE,
-      normalizedDebt: 1100n * DECIMAL_SCALE, // With accrued interest
+      normalizedDebt: 1100n * DECIMAL_SCALE, // Normalized debt used for debt calculation
       rate: RATE_INDEX_5_PERCENT,
     });
 
-    expect(result.principal.numerator).toBe(1100n * DECIMAL_SCALE);
+    // principal in result is always the original principal
+    expect(result.principal.numerator).toBe(1000n * DECIMAL_SCALE);
+    // totalRepay should be higher because normalizedDebt (1100) is used for calculation
+    expect(result.totalRepay.valueOf()).toBeGreaterThan(1100);
   });
 
   it("should handle zero rate (index = 1.0)", () => {

packages/moolah-sdk-core/src/calculations/loan.ts

@@ -56,34 +56,30 @@ export function calculateDynamicLoanRepayment(
     position.normalizedDebt ?? position.principal,
     loanDecimals,
   );
+  const principal = new Decimal(position.principal, loanDecimals);
 
   // rate is the cumulative borrow index in RAY format (27 decimals)
+  // actualDebt = normalizedDebt × (rate / RATE_SCALE_27)
   const rateIndex = new Decimal(position.rate, 27);
-
-  // Current debt = normalized debt × rate index
   const currentDebt = normalizedDebt.mul(rateIndex);
 
-  // Principal is the normalized debt
-  const principal = normalizedDebt;
-
-  // Interest = current debt - principal
+  // Calculate interest = currentDebt - original principal
   const currentInterest = currentDebt.sub(principal);
 
-  // Buffer = 10% of current interest
-  const bufferRate = new Decimal(10n ** 17n, 18); // 0.1 in 18 decimals
-  const buffer = currentInterest.mul(bufferRate);
-
-  // Total repay = current debt + buffer
+  // Add 10% of interest as buffer (excess is refunded)
+  const BUFFER_RATE = new Decimal(1n, 1); // 0.1 = 10%
+  const buffer = currentInterest.mul(BUFFER_RATE);
   const totalRepay = currentDebt.add(buffer);
-
-  // Total interest including buffer
   const interest = totalRepay.sub(principal);
 
+  // Accumulated rate = rateIndex - 1
+  const accumulatedRate = rateIndex.sub(Decimal.ONE);
+
   return {
     totalRepay,
     principal,
     interest,
-    rate: rateIndex,
+    rate: accumulatedRate,
   };
 }