Quillane must pay 1,209,600 in 1 year under a liability with no quoted price. Its credit rating having deteriorated, the discount rate reflecting its own credit risk rises from 8% to 12% (case data). Compute the fair value of the liability after the deterioration, then its change compared with the previous situation.
- Outflow to be paid
- 1,209,600
- Years before payment
- 1
- Rate before deterioration
- 8 %
- Rate after deterioration
- 12 %