Accrual Methods

See previous W5 version guide

PURPOSE

This document shows accrual methods and their definition.

FREQUENTLY ASKED QUESTIONS

FAQ01. What are accrual methods?

The following examples show different types of accrual methods and how system computes the interest.

A. Act/365 (Fixed)

B. Act/360

C. Act/365 (Actual) – CASE 1 (Start and end in the same year)

D. Act/365 (Actual) – CASE 1 (Start and end in different years)

E. Act/365 (Actual) – CASE 1 (Start and end in different years – span more than one year)

If the contract spans more than one year (i.e., 2004 to 2006) then for each complete calendar year, the amount of interest will be simply Principal * Interest Rate. The sub period at the start and end will be added as above.

F. 30/360

The formulae used by CS Lucas for 30/360 day count are as followsThe formulae used by CS Lucas for 30/360 day count are as follows

Source: hp 12c financial calculator

Example given:

CHANGE HISTORY