Question
On September 30, Year 1, the Lester Company negotiated a two year loan of 1,000,000 markka from a foreign bank at an interest rate of
On September 30, Year 1, the Lester Company negotiated a two year loan of 1,000,000 markka from a foreign bank at an interest rate of 2 percent per annum. Interest payments are made annually on September 30, and the principal will be repaid on September 30. Year 3. Lester Company prepares US dollar financial statements and has a December 31 year end.
How to calculate what the effective annual cost of borrowing is for year 1, 2 and 3. If you can give example of how to calculate at least one year.
9/30 year 1 - .20
10/31 year 1 - .21
9/30 year 2 .23
12/31 year 2 .24
9/30 year 3 .27
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