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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › interest free loan
maam I just wanted to confirm this since it turned up in one of the AAA questions. In case of interest free loan the effective interest rate that we use( which is the market interest rate applicable on similar instruments) at the inception fo the loan to figure out the FV(which is essentially the PV of future clash flows), that specific effective interest remains fixed right thought the term of the loan?
Yes – it is an implicit rate.
perfect! thank you:)
You’re welcome