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Sept/dec 2015 q2) armstrong

MMohamed10y ago
In part b we need to calculate the effective interest rate, how is it calculated?
John MoffatJohn MoffatTutor10y ago#1
You take the net receipt and divide by the amount of the loan (€25M). Because the loan is for 6 months, this would be the effective interest for 6 months, so to make it an annual rate you multiply by 2. (This is explained in detail in our free lectures on interest rate risk management)
MMohamed10y ago#2
Thank you
John MoffatJohn MoffatTutor10y ago#3
You are welcome :-)
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