ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank charge and P50,000 compensating balance. Required: 13. How much is the compound effective annual interest?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Problem E: Effective cost of Short‐term Loan:
ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank charge
and P50,000 compensating balance.
Required:
13. How much is the compound effective annual interest?
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