Question 3. Borrower Co has a policy of capitalising interest costs on self-constructed assets in accordance with IAS 23 Borrowing Costs.

During the year it has the following sources of borrowings

	Average outstanding liability($'000)	Interest Cost ($'000)
Medium term bank debt	10,000	900
50 year term debt	25,000	2,000
Bank overdraft	5,000	600

All the borrowings have been used to finance the production of qualifying assets but none relate to a specific qualifying asset. What is the appropriate capitalisation rate to apply to the qualifying assets?

Nil %

8.29%

8.75%

10.0%