Home  Journals  Finance and Credit  31(463) - 2011 August

Assessment of profitableness of the lender and cost of the borrower at the credit

Available online: 22 August 2011

Subject Heading: CREDITING

JEL Classification: 

The technique of calculating the profitability of the lender and borrower costs on a loan taking into account available to them reinvestment rates. It is shown that the current method of calculating the effective interest rate loan, based on the definition of internal rate of return (IRR) provides only an assessment of the effectiveness of the loan project (with the chosen scheme of calculation and payment of interest), but does not reflect the profitability / costs on the particular lender and borrower. Using the IRR as a measure of profitability / costs on the loan at a relatively low rate of reinvestment completely distort (accurate "to the contrary) a comparative analysis of profitability and costs of various credit schemes.

Keywords: calculation, the loan, the lender, borrower, yield, effective interest rate, EPS, IRR, reinvestment, discounting

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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