Scenario
Be aware that regardless of the Amortization Method you select (excluding None), Eagle Accounting amortizes to the target redemption price. For example, if you amortize the following scenario from Settlement Date to Maturity Date, each amortization method reaches 100,000 in total amortization, so there is no gain/loss at time of maturity. The difference between the methods is how they reach 100,000.
Coupon Rate:
10%
Issue Date:
01/01/2002
Dated Date:
01/01/2002
First Coupon Date:
07/01/2002
Last Coupon Date:
07/01/2006
Maturity Date:
01/01/2007
Lot 1
Trade Date
01/01/2002
Settle Date
01/01/2002
Par
100,0000
Price
95
Lot 1
95
The following table compares how Eagle Accounting calculates amortization for each Amortization/Accretion Method for this scenario. Each row represents a coupon date through maturity.
Start of Business Day | CY1 | CY2 | LY1 | LY2 | LD1 | LD2 | SL | SLA |
|---|---|---|---|---|---|---|---|---|
Yield | 11.337435118341 | 11.337435118341 | 11.337435118341 | 11.337435118341 | 11.466468077718 | 11.305503612078 | 11.337435118341 | 11.337435118341 |
01/01/2002 | 13.28 | 21.29 | 21.40 | 21.29 | 20.66 | 18.01 | 27.78 | 27.38 |
07/01/2002 | 3,852.82 | 3,852.82 | 3,852.82 | 3,852.82 | 3,826.18 | 3,352.34 | 5,000.00 | 4,956.19 |
01/01/2003 | 7,924.04 | 7,924.04 | 7,924.04 | 7,924.04 | 7,874.91 | 7,811.08 | 10,000.00 | 9,994.52 |
07/01/2003 | 12,226.05 | 12,226.05 | 12,226.05 | 12,226.05 | 12,159.15 | 11,613.76 | 15,000,00 | 14,950.71 |
01/01/2004 | 16,771.93 | 16,771.93 | 16,771.93 | 16,771.93 | 16,692.59 | 16,556.93 | 20,000.00 | 19,989.05 |
07/01/2004 | 21,575.50 | 21,575.50 | 21,575.50 | 21,575.50 | 21,489.72 | 21,172.46 | 25,000.00 | 24,972.62 |
01/01/2005 | 26,651.37 | 26,651.37 | 26,651.37 | 26,651.37 | 26,565.89 | 26,676.14 | 30,000.00 | 30,010.95 |
07/01/2005 | 32,014.98 | 32,014.98 | 32,014.98 | 32,014.98 | 31,937.32 | 31,566.49 | 35,000.00 | 34,967.14 |
01/01/2006 | 37,682.64 | 37,682.64 | 37,682.64 | 37,682.64 | 37,621.19 | 37,679.65 | 40,000.00 | 40,005.48 |
07/01/2006 | 43,671.58 | 43,671.58 | 43,671.58 | 43,671.58 | 43,635.68 | 43,204.41 | 45,000.00 | 44,961.67 |
01/01/2007 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 |
Note that the CY1, CY2, LY1, and LY2 methods have the same period-to-date values calculated; this . This occurs because:
- In the prior scenario, there is no traded interest. Constant Yield amortization takes traded interest into account when applying amortization, but if you apply Level Yield amortization, it does not take traded interest into account.
- Constant Yield 1 and Constant Yield 2 always calculate to the same period-to-date values, but they apply different methodology to derive the daily delta.
- Level Yield 1 and Level Yield 2 calculate the same period-to-date information when you purchase the security with full coupon periods.
Scenario for Accrued Interest
If there was accrued interest in a scenario, there would be different values calculated for CY1, CY2, LY1, and LY2:
Coupon Rate
10%
Issue Date
01/01/2002
Dated Date
01/01/2002
First Coupon Date
07/01/2002
Last Coupon Date
07/01/2006
Maturity Date
01/01/2007
Lot 1
Trade Date
01/15/2002
Settle Date
01/18/2002
Par
1,000,000
Price
95
The following table shows the values calculated for each Amortization/Accretion Method on each coupon date through maturity for this scenario where there is accrued interest.
Date | CY1 | CY2 | LY1 | LY2 | LD1 | LD2 |
|---|---|---|---|---|---|---|
Yield | 11.344051709452 | 11.344051709452 | 11.347064897884 | 11.347011056485 | 11.476172984300 | 11.313842141438 |
01/01/2002 | 14.89 | 22.14 | 21.66 | 21.54 | 20.92 | 18.23 |
07/01/2002 | 3,631.24 | 3,631.24 | 3,530.36 | 3,532.16 | 3,497.81 | 3,065.98 |
01/01/2003 | 7,721.45 | 7,721.45 | 7,629.21 | 7,630.86 | 7,574.48 | 7,549.24 |
07/01/2003 | 12,043.66 | 12,043.66 | 11,960.61 | 11,962.10 | 11,888.49 | 11,377.63 |
01/01/2004 | 16,611.03 | 16,611.03 | 16,537.76 | 16,539.07 | 16,453.65 | 16,348.64 |
07/01/2004 | 21,437.46 | 21,437.46 | 21,374.59 | 21,375.72 | 21,284.58 | 20,993.52 |
01/01/2005 | 26,537.64 | 26,537.64 | 26,485.84 | 26,486.78 | 26,396.75 | 26,528.82 |
07/01/2005 | 31,927.11 | 31,927.11 | 31,887.08 | 31,887.81 | 31,806.54 | 31,452.31 |
01/01/2006 | 37,622.27 | 37,622.27 | 37,594.76 | 37,595.27 | 37,531.28 | 37,601.35 |
07/01/2006 | 43,640.46 | 43,640.46 | 43,626.27 | 43,626.54 | 43,589.30 | 43,163.71 |
01/01/2007 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 | 50,000.00 |
As you can see, Level Yield and Constant Yield have different period-to-date information. (This differs from the previous scenario, where CY1, CY2, LY1, and LY2 had the same period-to-date values,)