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In question 3 June 2015 , in computing the interest payable on the $30 mil loan , the stated interest is used.
Why is this ?
I thought the 8% would be used only in the annuity computation.
Please assist.
Yes, but the reason the total of the annuity payments is more than the 30M is because there is interest being charge at 8% on the amount outstanding each year.
The table in the examiners answer ‘proves’ this (the 2 outstanding at the end is simply because of rounding), and the interest each year will be an expense in the statement of profit or loss.
Apologies if I am being silly , but i thought 8% bond meant that PMT is computed at 8% not the interest
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