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Please can you tell me why the calculation does not include the issue costs of 1 million and why we calculate the difference between the two rates and not just use the effective as we did in previous examples. Thanks.
1) Because the issue costs are debited to the loan account itself
2) Because that’s what we’re told to do – it’s the rule!
Thanks for 1 above. I still don’t understand 2 as we have just used the effective rate in Q3. How does Q3 differ from Q5 apart from the issue costs?
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