An institution acquires an instrument that will pay it a single cash flow of 1,331,000 in 3 years. The market rate observed for comparable cash flows is 10 %. It pays 960,000. Fair value is required at initial recognition (case data). Compute the difference between the fair value obtained by discounting and the transaction price.
- Expected cash flow
- 1,331,000
- Market rate observed
- 10 %
- Time before the cash flow
- 3
- Price paid
- 960,000