Depending on the frequency of compounding, how can the effective interestearned (or paid by the borrower) can differ significantly from the APR?

Q: Define the term Deferred Loan Repayments?

A: Answer: A deferred loan payment is nothing but a loan agreement in which the borrower may start…

Q: What evidence is necessary to demonstrate the ability to defer settlement of short-term debt?

A: Short-term debt: Short-term debt refers to the current liability of an organization. This means that…

Q: What interest rates should be used in determining the amount of interest to be capitalized? How…

A:

Q: What are the most frequent uses of contingent payments?

A: A contingent payment is a mechanism used in M&A whereby, in addition to an upfront payment,…

Q: When using the internal rate of return method, interest payments should OA. not be discounted OB. be…

A: While using Internal rate of return calculation we have to discount each element of income and cost…

Q: How does the difference between the book value of the debt and the reacquisition price represents…

A: Definition: Early extinguishment debt: When the debt obligations are retired before its scheduled…

Q: Why What kind of stream of income does a debt security pay for the duration of the security? A fixed…

A: The Answer

Q: Explain the addition to the interest rate, HELOC borrowers consider the issues?

A: Home buyers mostly take loans to buy the home and they will pay the debt in equated installments.…

Q: When is it recommended to compute the effective interest rate per payment period?

A: When there is a compounding of interest, then the EIR per payment period is recommended. As it is a…

Q: NANGUTANG started constructing a building for its own use on January 1, 2020. NANGUTANG provided the…

A: Effective Rate of Interest= Total Amount of Interest/Total Amount of Loan 2500000/30000000=8.33%

Q: What will be the Effect of the After-Tax Interest Cost on Loan Decisions?

A: Interest cost for loan borrowers depends mainly upon the rate of interest charged by lenders.…

Q: How do we record the interest payment (provide examples for both premium and discount amortization),…

A: Bonds are a form of debt or loan taken by the company, on which regular interest payments needs to…

Q: What is the difference between an interest rate change and a life of loan interest rate change cap.?…

A: Interest rate change caps are financial instruments used to manage interest rate risk for borrowers,…

Q: Summarize the varying effective interest rates per payment period under compounding frequencies?

A: The varying effective rate per payment period in case of compounding frequencies as under: When…

Q: Whenever payment and compounding periods differ from each other, it is recommended to compute the…

A: The effective annual interest rate is the real return for a bank account or other interest paid…

Q: If the debt is being amortized by equal payments, what is the amortization schedule ?

A: As calculated, Annual installment is $ 88,094.54 Closing Balance = Opening balance + Interest on…

Q: What is the impact of a change in the interest rate on the treatment of borrowing costs?

A: An interest rate is the fee that a lender assesses a borrower to use money borrowed, it is…

Q: Why there is a difference between the interest rate and the APR

A: Interest rates and APR are two phrases that are sometimes used interchangeably to refer to…

Q: What is a compensating balance? What effect does a compensatingbalance requirement have on the…

A:

Q: How is the PW analysis dependent on the rate of interest used for the PW computation?

A: Net present value (or) PW analysis is one of the capital budgeting techniques. When a company is…

Q: Differences between Accrued Interest and Payments?

A: Answer: An accrued interest is nothing but interest on a loan or an interest on bond that has been…

Q: Should liability for rent deposit be amortized? Why or why not?

A: The assets are amortized as they provide benefits for the long period.

Q: Define the term Non-comparable Compounding and Payment periods?

A: The question is based on the concept of interest rate calculation, which depend on the compounding…

Q: What are out of period debts? Explain?

A: Out of Period debts: It is also known as time barred debts.