From the following particulars, calculate the effective rate of interest p.a. as well as the total cost of funds to Bhaskar Ltd., which is planning…

Nominal Interest or Bond Equivalent Yield = [(F-P)/P] × [12/M] × 100 Where F= Face Value P= Issue Price = [(1,00,000 - 97,550) / 97,550] × [12/3] × 100 = 0.025115 × 4 × 100 = 10.046 = 10.05% p.a. Effective interest rate = [1 + (0.1005 / 4)] 4 – 1 = 10.435% p.a. Cost of Funds to the Company Effective Interest 10.435% Brokerage (0.150 × 4) 0.60% Rating Charge 0.50% Stamp duty (0.175 × 4) 0.70% 12.235% Alternatively, effective interest rate can also be computed as follows: Let i be the interest rate then 97,750 = 100000 / (1 + i × 3/12) i = 10.046 Cost of Funds to the Company Effective Interest 10.046% Brokerage (0.150 × 4) 0.60% Rating Charge 0.50% Stamp duty (0.175 × 4) 0.70% 11.846%