Determine the semi-annual effective interest rate

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Reference no: EM132813138

Question - On 1 January 20x1, Feel makes a 3-year loan of $600,000 to Fancy Ltd ("Fancy") with an annual interest rate of 4% payable semi-annually at the end of June and December. Feel pays legal fees of $20,000 in relation to the preparation of the loan agreement. Feel has no intention to sell the loan, and intends to collect the interest and principal payments only. Feel receives all interest payments from Fancy in year 20x1.

From Feel's perspective, determine the semi-annual effective interest rate of the loan on 1 January 20x1.

Reference no: EM132813138

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