Amortisation of securities using EIR

[victor_nkomo3]

Hi Friends

I have the following scenario

Here is my parameters of the bond

Issue date 01/01/2014

Maturity date-31/12/2014

Coupon rate 2% semi annually  Act/360

Purchase date 13/05/2014 Value date 15/05/2014

Nominal  100m

Price 95%

Accrued Interest on purchase- 745,362.624  -- 135 days

When i run TPM 1 on first day  value date 15/05/2014 no flows are generated , My expectation to match clients flows is

Amortization on first day---15/05/2014----              21,739 Also if i run TPM1 on the 30/12/2014 i expect full amount of $5 000 000 but system generates  4,973,155.260

System gives me EIR of 10.5217595

PMP I am using 9980 amortization step 4000 SAC Gross- (See attachment)

Thank you inadvance for your input

Victor

[Former Member]

Hello Victor,

Couple thoughts:

Your 1st amortization should be on 16/05/2014 and that should result in an amount close to what you are expecting.

Your last amortization should be on 31/12/2014 and that should in amount of 5M (provided no amortizations have been posted before).

Also, in amortization procedure setting, you should probably have "Adjust Effective interest rate immediately" because the "Constant effective interest rate" setting is for securities with installment repayment (from your example, it did not seem like yours was that case).

Let us know.

Mani

[victor_nkomo3]

Hi Mani

Client expects to see first amortisation on the 15/05/2014 that is on the value date and he expects last amortisation to run on the 30/12/2014 and when i run TPM1 on the 15/05 no flows are generated , it gives amortisation of 0000 also when i run TPM1 on 31/12/2014 system says no position found but when . also advise is there a way to find out on the formula SAP is using because my EIR on purchase date is 10.5217595% whereas clieant shows EIR of 10.34%. It seems I am missing one day .

Regards

Victor

[Former Member]

I don't see an attachment.

[victor_nkomo3]

Hi Mani

Could not attach but its

SAC Gross

Amortisation to end term

Effective interest rate method in accordance with IAS

Constant Effective interest rate

Thank you in advance