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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Financial Instruments
Can you please tell me what is difference b/w effective interest rate and coupon rate?
The coupon rate is the legally binding amount of interest that is paid based on the coupon value of the instrument.
The effective rate is the rate that is derived by accountants to take into consideration the substance of the interest rate implicit in the instrument, taking account of the coupon interest plus and redemption premium.
Thanks for the answer.