Solved

From the Following Extract of an Amortisation Schedule Pertaining to a Compound

Question 73

Multiple Choice

From the following extract of an amortisation schedule pertaining to a compound financial instrument,what is the effective-interest rate embodied in the instrument?  Period  Opening  liability  Effective  interest  Coupon rate  Discount  amortisation  Balance of  discount  Net liability 07360559263945192639455558375000005583768021893197822931978255918750000059187621031937896939378969562738500000627385582939441707\begin{array} { | c | r | r | r | r | r | r | } \hline \text { Period } & \begin{array} { c } \text { Opening } \\\text { liability }\end{array} & \begin{array} { c } \text { Effective } \\\text { interest }\end{array} & \text { Coupon rate } & \begin{array} { c } \text { Discount } \\\text { amortisation }\end{array} & \begin{array} { c } \text { Balance of } \\\text { discount }\end{array} & \text { Net liability } \\\hline 0 & & & & & 736055 & 9263945 \\\hline 1 & 9263945 & 555837 & 500000 & 55837 & 680218 & 9319782 \\\hline 2 & 9319782 & 559187 & 500000 & 59187 & 621031 & 9378969 \\\hline 3 & 9378969 & 562738 & 500000 & 62738 & 558293 & 9441707 \\\hline\end{array}


A) 6%
B) 5%
C) Variable, as shown in the table it has increased from 5.5837% in Period 1 to 6.2738% in Period 3.
D) 4%.

Correct Answer:

verifed

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents