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In a june 2014 exam question it says “finance obtained from subsidised loan scheme which lends money at 100 basis points below 10-year government debt yield rate of 2.5%”
What does government debt yield rate means ? and what will be the annual subsidy benefit on 100$ loan?
Thanks 🙂
The government debt yield rate is the return to investors on government debt.
If they have a loan at 100 basis point below 2.5% then they pay 1.5% (and get a subsidy of 1%)
Thank you for such a quick reply!
In the past exam mark sheets, the answers multiply the subsidy percentage with (1-T). in this example it would have been 100$ x 1% x (1-30%).
I dont seem to understand why do they take TAX into consideration on subsidy.
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