![]() In spreadsheet programs like MS Excel, this can be done using the XIRR function. Given the above information, Entity A can create a cash flow schedule and calculate the effective interest rate (EIR) as demonstrated below. Coupon: 5%, equating to $50 (calculated on face value), paid annually on 31 December.Transaction price (including coupon accrued to date): $900.The relevant data for this scenario is provided below: Let’s illustrate this concept with two worked examples presented below.Įxample: Calculating amortised cost of an assetĮntity A purchases a bond on a stock exchange for $900. ![]() This rate perfectly discounts projected future cash flows to the present carrying amount of a financial asset or liability. The amortised cost is determined using the effective interest rate (EIR).
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