In this paper we examine the cost structure of loans obtained by means of a commercial bill and develop a method for calculating the true cost of borrowing. This true cost is expressed as a nominal rate of interest per annum which duly takes into account all relevant borrowing costs, that is, all those costs which are the direct consequence of having taken out the loan. The analysis deals with the common case of renewing the loan (‘rolling over the bill’) for a second period, and the general case where (n–1) renewals are effected is also described.
Bernhard, R. H., 1979, “A More General Sufficient Condition for a Unique Non-negative Internal Rate of Return”, Journal of Financial and Quantitative Analysis, 14, 337–41.
2.
Bernhard, R. H., 1980, “A Simplification and an Extension of the Bernhard-De Faro Sufficient Condition for a Unique Non-negative Internal Rate of Return”, Journal of Financial and Quantitative Analysis, 15, 201–9.
3.
Crowther, G. Lord, 1971, Report of the Committee on Consumer Credit (London, HMSO), pp. 589–604.
4.
De Faro, C., 1973, “A Sufficient Condition for a Unique Non-negative Internal Rate of Return”, Journal of Financial and Quantitative Analysis, 8, 683–4.
5.
De Faro, C., 1978, “A Sufficient Condition for a Unique Non-negative Internal Rate of Return: Further Comments”, Journal of Financial and Quantitative Analysis, 13, 577–84.
6.
Molomby, T., 1972, Report on Fair Consumer Credit Laws to the Honorable G.O. Reid, Q.C., M.L.A., Attorney-General for the State of Victoria, by a Committee of the Law Council of Australia (Government Printer, Melbourne, Report C. No. 5–777/72), section 4.5.18.
7.
Norstrom, C. J.1972, “A Sufficient Condition for a Unique Non-negative Internal Rate of Return”, Journal of Financial and Quantitative Analysis, 71, 1835–9.
8.
Rickard, J. A. and Russell, A.M., 1980, “Understanding Interest Rates”, The Australian Accountant, 50, 412–15.
9.
Rickard, J.A. and A.M. Russell, 1981, “Interest Rates in Perspective; and a New Inequality”, Mathematical Scientist, 6, 111–21.
10.
Stanton, H.G. and J.A. Rickard, 1981, “A Cost Comparison of Personal Loans from Banks and Credit Co-operatives”, The Australian Accountant, 51, 708–10.
11.
Stanton, H.G. and J.A. Rickard, 1982, “A Cost Comparison of Bank Personal Loans and Bankcard”, The Australian Accountant, 52, 321–23.
12.
United States Statutes at Large, 1968, Consumer Credit Protection Act, Public Law 90–321 (Washington, United States Government Printing Office), Vol.82.
