Hi,
Could you please just clarify why Example 6 in the APV section uses Risk Free Rate of Interest instead of the 6% that is being charged by the Government?
Is this purely because it is a Government loan which is assumed to be risk free & if it was a bank loan we would use the Pre-Tax interest rate charged?
Thanks
Sam
CIMA Forums
Example 6 P3 APV
8y ago#1There are differences of opinions about which interest rate to use when evaluating the saving. Especially, as you say, the Government is the lender. This year, the majority choice would go for the interest rate being charged (6%), not the risk free rate.
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