The interest rate that determines the amount of cash interest paid each interest date is referred to as the:

Question

Quizplus · Accepted Answer

The stated rate is the rate that is explicitly stated in the loan agreement or bond indenture as the rate used to calculate the cash interest payments. This is the rate that is used to determine the amount of interest to be paid to the holder of the bond or loan on each interest date. The market rate is the rate that is prevailing in the market at any given time for similar debt instruments, and it is used to determine the fair value of the bond or loan. The cash rate and effective rate are not correct answers in this context.

The Interest Rate That Determines the Amount of Cash Interest