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Floating interest rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Floating interest rate

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • May 19, 2021 at 11:11 pm #621135
    Syed Ahsan Ali
    Participant
    • Topics: 136
    • Replies: 85
    • ☆☆☆

    Sir, u said in your lecture on chapter 24 Interest rate risk that floating interest rate is charged on a day-to-day basis.

    Could you please explain how the bank charges a floating rate on debt borrowing?

    If we have borrowed $100,000 while the floating interest rate is 5% but in a week’s time it is increased to 7% how would the bank charge interest on borrowing?

    May 20, 2021 at 7:36 am #621167
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    They would charge at the rate of 5% per year for one week, and then charge at the rate of 7% per year for the rest of the period of the loan.

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