Effective interest rate on options

This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.

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July 21, 2021 at 11:18 am #628994
lavenite
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If we are calculating the effective interest rate, does the net payment (the numerator in the calculation which includes actual interest payment and premium) also include the gain/loss made on exercising the option?

Thank you!
July 21, 2021 at 3:22 pm #629028
John Moffat
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The effective interest rate gives the effective interest if the option is exercised I.e the maximum interest rate or minimum interest rate depending on whether we are borrowing or investing.

Have you watched my free lectures on this?
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