20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for December 2025 exams.
Get your discount code >>

Calculation of Interest Rate Collars

This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
January 21, 2022 at 8:27 am #647182
Krina23
Member
- Topics: 2
- Replies: 0
While calculating the premium on interest rate collars, why do we not take the quarterly premium value?
i.e., if the premium is 0.21%, why do we take it as 0.21 and not (0.21/4) = 0.0525%?
https://www.youtube.com/watch?v=DqQpHaWtNf8
At 22:40
January 21, 2022 at 10:38 am #647196
John Moffat
Keymaster
- Topics: 57
- Replies: 54752
It is because here we are calculating the effective maximum and minimum annual interest rates, and the premium is quoted as an annual rate (even though the actual $ interest paid and the actual $ premium paid will not be being paid for a full year).
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.