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Effective Interest Rate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Effective Interest Rate

  • This topic has 0 replies, 1 voice, and was last updated 8 months ago by syra96.
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  • October 23, 2024 at 9:22 am #712651
    syra96
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    • Topics: 3
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    Good morning, I am trying to get my head around something and any clarification would be much appreciated.

    Company A is being charged £140,000 (incl VAT) by Company B for some equipment.
    Terms are: £2333 monthly and on the 60th month Company A makes a final payment of £2353.
    There is no reference made to interest or fair value in the lease.
    Company A is new to trading so the bank cannot provide an interest rate for a loan to use as a proxy. In this scenario, what would company A use to determine the effective rate of interest?

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