From the Following Extract of an Amortisation Schedule Pertaining to a Compound

question 32

Multiple Choice

From the following extract of an amortisation schedule pertaining to a compound financial instrument,what is the effective-interest rate embodied in the instrument? $\begin{array}{|l|l|l|l|l|l|l|}\hline\text { Period } & \text { Opening } &\text { Effective } & \text { Coupon rate } &\text { Discount } &\text { Balance of } & \text { Net liability }\\&\text { liability }&\text { interest }&&\text { amortisation }&\text { discount }&\\\hline 0 & & & & & 736055 & 9263945 \\\hline 1 & 9263945 & 555837 & 500000 & 55837 & 680218 & 9319782 \\\hline 2 & 9319782 & 559187 & 500000 & 59187 & 621031 & 9378969 \\\hline 3 & 9378969 & 562738 & 500000 & 62738 & 558293 & 9441707\\\hline\end{array}$

• A)6%
• B)5%
• C)Variable, as shown in the table it has increased from 5.5837% in Period 1 to 6.2738% in Period 3.
• D)4%.