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Risk-Free Rate Risk-free rate (interest rate) has a positive relationship with the value of call option. The higher is the interest rate the higher is the Co. This is so because the final payment for the purchase of shares is delayed till the time the option is...
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EXAMPLE 2-A.8 (Flat Rate and APR) From the undermentioned facts, develop the repayment schedule for the three consumer financing schemes (A), (B) and (C) using the flat rate of interest. Also, compute the effective rate of interest (APR) Using both long and short-cut...
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Effective and Flat Rates of Interest As shown above in the loan repayment/amortization schedule, effective rate of interest (also called annual percentage rate, APR) is applied 10 the diminishing balances of the loan amount to determine the interest content of each...
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Example 2-A.6 The lease rentals for as-year contract an: Rs 300/Rs 1,000 payable annually in arrears. Assuming no salvage value, compute the rate of interest implied by the contract and develop a lease amortization schedule. Solution The implied rate of interest, i, =...
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Loan Repayment Schedule for Annuities Each installment of an annuity payable PTHLY has two components: (i) the capital (repayment of principal) and (ii) the interest component. To identify these two components. a loan repayment schedule is to be developed. We...
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EXAMPLE 2-A.5 The current lease rates quoted by the First Leasing Ltd contracts are: (i) Rs 18 Rs 1.000 month and (ii) Rs 12.5 Rs 1,000, month for speculatively. While the morph circlet, or contract in arrears. The 5 years contract are payable in advance. Assuming 10...