Effective interest rate
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1. Financial reporting.
In relation to a financial asset or financial liability, the internal rate of return of the cash flows of the instrument, including the initial cost and the final maturity amount.
2. Hedging.
A hedged interest rate achieved, after interest rate risk management.
For example, the hedged interest rate achieved when hedging an interest rate exposure with an FRA.
3. Interest rates - comparability.
Annual effective rate.
