I dont understand the treatment of the %, i read the text but dosent sink in, anyone can explain it to me, from another aspect , pleaseeee.
When you are defining cash flows and interest payment for the year to the loan-holder – you use nominal rate.
When you discount cash flows (interest payments and repayment of the principal) – you use market rate.
When you calculate finance costs for the year – you use the market rate for similar notes without conversion.
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