Investment in Bond – Average at Market Value

PURPOSE

To show illustration of investment in bond average at market value.

OVERVIEW

TRANSACTION DETAILS

Accounting Base Ccy
SGD

Security Parameters

Currency
Accrual Basis
Issue Date
Maturity Date
Coupon
Frequency
SGD
Act/365
15-Jul-02
15-Jan-04
2.8750%
Quarterly

Coupon Payment Schedule

Type End DateVDate
Coupon
Coupon PPM
Issued Principal15-Jul-0215-Jul-02
2.875000
0.000000
Periodic Repayment 15-Oct-0215-Oct-02
2.875000
7,246.575340
Periodic Repayment 15-Jan-0315-Jan-03
2.875000
7,246.575340
Periodic Repayment 15-Apr-0315-Apr-03
2.875000
7,089.041100
Periodic Repayment 15-Jul-0315-Jul-03
2.875000
7,167.808220
Periodic Repayment 15-Oct-0315-Oct-03
2.875000
7,246.575340
Periodic Repayment 15-Jan-0415-Jan-04
2.875000
7,246.575340

Transactions

TradeIDBuy/Sell
Quantity
Price (%)
TDateVDate
Purchase Interest
Proceeds
IVM1001Buy
1,000,000.00
102.00
3-Feb-034-Feb-03
1,575.34
1,021,575.34
IVM1002 Buy
2,000,000.00
97.00
15-Feb-0316-Feb-03
5,041.10
1,945,041.10
IVM1003Sell
300,000.00
99.00
17-Apr-0318-Apr-03
70.89
297,070.89
IVM1004Sell
1,050,000.00
101.50
24-Apr-0325-Apr-03
827.05
1,066,577.05

Coupon Received

TradeID
Quantity
VDate
Proceeds
CPN1001
3,000,000.00
15-Apr-03
21,267.12

Market Prices

Date
Valuation Price
28-Feb-03
115%
31-Mar-03
105%
30-Apr-03
99%

SUMMARY OF JOURNALS

IDDateDescription
J13-Feb-03Trade Date Journals
J24-Feb-03Settlement Date Journals
J315-Feb-03Trade Date Journals
J416-Feb-03Settlement Date Journals
J528-Feb-03Month End Revaluation of Bond Investment position
J61-Mar-03Reversal of Month End Revaluation of Bond Investment position
J731-Mar-03Month End Revaluation of Bond Investment position
J81-Apr-03Reversal of Month End Revaluation of Bond Investment position
J915-Apr-03Coupon Settlement Journals
J1017-Apr-03Trade Date Journals
J1118-Apr-03Settlement Date Journals
J1224-Apr-03Trade Date Journals
J1325-Apr-03Settlement Date Journals
J1430-Apr-03Month End Revaluation of Bond Investment position

J1                  Trade Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM10013-Feb-03BINV: Investment Bond CostSGD1,020,000.001.000000SGD1,020,000.00J1a
IVM10013-Feb-03PINV: Investment Interest IncomeSGD1,575.341.000000SGD1,575.34J1b
IVM10013-Feb-03BINV: Due to BrokerSGD-1,021,575.341.000000SGD-1,021,575.34J1c

Note J1b:           Calculation of Accrued Interest

Last Coupon Date15-Jan-03A
Next Coupon Date15-Apr-03B
VDate4-Feb-03C
Days to Vdate (exclude 4-Feb)20D = C-A
Total Days (exclude 15-Apr)90E = B-A
Coupon PPM (Part Per Million)7,089.041100F
Quantity1,000,000.00G
Accrued Interest1,575.34H = F*D/E*G/1000000

J2                  Settlement Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM10014-Feb-03BINV: Due to BrokerSGD1,021,575.341.000000SGD1,021,575.34J2a
IVM10014-Feb-03BCash at BankSGD-1,021,575.341.000000SGD-1,021,575.34J2b

J3                  Trade Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100215-Feb-03BINV: Investment Bond CostSGD1,940,000.001.000000SGD1,940,000.00J3a
IVM100215-Feb-03PINV: Investment Interest IncomeSGD5,041.101.000000SGD5,041.10J3b
IVM100215-Feb-03BINV: Due to BrokerSGD-1,945,041.101.000000SGD-1,945,041.10J3c

Note J3b:           Calculation of Accrued Interest

Last Coupon Date15-Jan-03A
Next Coupon Date15-Apr-03B
VDate16-Feb-03C
Days to Vdate (exclude 16-Feb)32D = C-A
Total Days (exclude 15-Apr)90E = B-A
Coupon PPM (Part Per Million)7,089.041100F
Quantity2,000,000.00G
Accrued Interest5,041.10H = F*D/E*G/1000000

J4                  Settlement Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100216-Feb-03BINV: Due to BrokerSGD1,945,041.101.000000SGD1,945,041.10J4a
IVM100216-Feb-03BCash at BankSGD-1,945,041.101.000000SGD-1,945,041.10J4b

J5                  Month End Revaluation of Bond Investment position

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
Portfolio/Sec28-Feb-03BINV: Investment Interest ReceivableSGD10,633.561.000000SGD10,633.56J5a
Portfolio/Sec28-Feb-03PINV: Investment Interest IncomeSGD-10,633.561.000000SGD-10,633.56J5b
Portfolio/Sec28-Feb-03BINV: Investment Bond Cost-RevaluationSGD490,000.001.000000SGD490,000.00J5c
Portfolio/Sec28-Feb-03PINV: Unrealised MTM-P/L - PriceSGD-490,000.001.000000SGD-490,000.00J5d

Note J5b:           Calculation of Accrued Interest

Last Coupon Date15-Jan-03A
Next Coupon Date15-Apr-03B
VDate28-Feb-03C
Days to Vdate (include 28-Feb)45D = C-A+1
Total Days (exclude 15-Apr)90E = B-A
Coupon PPM (Part Per Million)7,089.041100F
Quantity3,000,000.00G
Accrued Interest10,633.56H = F*D/E*G/1000000

Note J5d:           Calculation of unrealised Profit/Loss – Price

                               Calculation of Cost

Trade ID
Quantity
Cost
Total Cost
IVM1001
1,000,000.00
1.020000
1,020,000.00
IVM1002
2,000,000.00
0.970000
1,940,000.00
3,000,000.00
0.986667
2,960,000.00
I
K=J/I
J

                              Calculation of unrealised profit/loss (price impact)

Position (Qty)
Ave Cost
Market Price
Profit/(Loss)
3,000,000.00
0.986667
1.150000
490,000.00
I
K
L
M=(L-K)*I

J6                  Reversal of Month End Revaluation of Bond Investment position

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
Portfolio/Sec1-Mar-03BINV: Investment Interest ReceivableSGD-10,633.561.000000SGD-10,633.56J6a
Portfolio/Sec1-Mar-03PINV: Investment Interest IncomeSGD10,633.561.000000SGD10,633.56J6b
Portfolio/Sec1-Mar-03BINV: Investment Bond Cost-RevaluationSGD-490,000.001.000000SGD-490,000.00J6c
Portfolio/Sec1-Mar-03PINV: Unrealised MTM-P/L - PriceSGD490,000.001.000000SGD490,000.00J6d

J7                  Month End Revaluation of Bond Investment position

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
Portfolio/Sec31-Mar-03BINV: Investment Interest ReceivableSGD17,958.901.000000SGD17,958.90J7a
Portfolio/Sec31-Mar-03PINV: Investment Interest IncomeSGD-17,958.901.000000SGD-17,958.90J7b
Portfolio/Sec31-Mar-03BINV: Investment Bond Cost-RevaluationSGD190,000.001.000000SGD190,000.00J7c
Portfolio/Sec31-Mar-03PINV: Unrealised MTM-P/L - PriceSGD-190,000.001.000000SGD-190,000.00J7d

Note J7b:           Calculation of Accrued Interest

Last Coupon Date15-Jan-03A
Next Coupon Date15-Apr-03B
VDate31-Mar-03C
Days to Vdate (include 31-Mar)76D = C-A+1
Total Days (exclude 15-Apr)90E = B-A
Coupon PPM (Part Per Million)7,089.041100F
Quantity3,000,000.00G
Accrued Interest17,958.90H = F*D/E*G/1000000

Note J7d:           Calculation of unrealised Profit/Loss – Price

                                Calculation of Cost

Trade ID
Quantity
Cost
Total Cost
IVM1001
1,000,000.00
1.020000
1,020,000.00
IVM1002
2,000,000.00
0.970000
1,940,000.00
3,000,000.00
0.986667
2,960,000.00
I
K=J/I
J

                               Calculation of unrealised profit/loss (price impact)

Position (Qty)
Ave Cost
Market Price
Profit/(Loss)
3,000,000.00
0.986667
1.050000
190,000.00
I
K
L
M=(L-K)*I

J8                  Reversal of Month End Revaluation of Bond Investment position

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
Portfolio/Sec1-Apr-03BINV: Investment Interest ReceivableSGD-17,958.901.000000SGD-17,958.90J8a
Portfolio/Sec1-Apr-03PINV: Investment Interest IncomeSGD17,958.901.000000SGD17,958.90J8b
Portfolio/Sec1-Apr-03BINV: Investment Bond Cost-RevaluationSGD-190,000.001.000000SGD-190,000.00J8c
Portfolio/Sec1-Apr-03PINV: Unrealised MTM-P/L - PriceSGD190,000.001.000000SGD190,000.00J8d

J9                  Coupon Settlement Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
CPN100115-Apr-03PINV: Investment Interest IncomeSGD-21,267.121.000000SGD-21,267.12J9a
CPN100115-Apr-03BCash at BankSGD21,267.121.000000SGD21,267.12J9b

J10                Trade Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100317-Apr-03BINV: Investment Bond CostSGD-296,000.001.000000SGD-296,000.00J10a
IVM100317-Apr-03PINV: Investment Interest IncomeSGD-70.891.000000SGD-70.89J10b
IVM100317-Apr-03PINV: Trading Income Price ImpactSGD-1,000.001.000000SGD-1,000.00J10c
IVM100317-Apr-03BINV: Due From BrokerSGD297,070.891.000000SGD297,070.89J10d

Note J10b:        Calculation of Accrued Interest

Last Coupon Date15-Apr-03A
Next Coupon Date15-Jul-03B
VDate18-Apr-03C
Days to Vdate (exclude 18-Apr)3D = C-A
Total Days (exclude 15-Jul)91E = B-A
Coupon PPM (Part Per Million)7,167.808220F
Quantity300,000.00G
Accrued Interest70.89H = F*D/E*G/1000000

Note J10a:        Calculation of Cost

Trade ID
Quantity
Cost
Total Cost
IVM1001
1,000,000.00
1.020000
1,020,000.00
IVM1002
2,000,000.00
0.970000
1,940,000.00
3,000,000.00
0.986667
2,960,000.00
I
K=J/I
J
Trade ID
Quantity
Ave Cost
Total Cost
IVM1003
-300,000.00
0.986667
-296,000.00
L
K
M=L*K

Note J10c:        Calculation of Trading Income Price Impact

Quantity
Ave Cost
Selling Price
Profit/(Loss)
300,000.00
0.986667
0.990000
1,000.00
I
K
N
O = (N-K)*I

J11                Settlement Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100318-Apr-03BINV: Due From BrokerSGD-297,070.891.000000SGD-297,070.89J11a
IVM100318-Apr-03BCash at BankSGD297,070.891.000000SGD297,070.89J11b

J12                Trade Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100424-Apr-03BINV: Investment Bond CostSGD-1,036,000.001.000000SGD-1,036,000.00J12a
IVM100424-Apr-03PINV: Investment Interest IncomeSGD-827.051.000000SGD-827.05J12b
IVM100424-Apr-03PINV: Trading Income Price ImpactSGD-29,750.001.000000SGD-29,750.00J12c
IVM100424-Apr-03BINV: Due From BrokerSGD1,066,577.051.000000SGD1,066,577.05J12d

Note J12b:        Calculation of Accrued Interest

Last Coupon Date15-Apr-03A
Next Coupon Date15-Jul-03B
VDate25-Apr-03C
Days to Vdate (exclude 25-Apr)10D = C-A
Total Days (exclude 15-Jul)91E = B-A
Coupon PPM (Part Per Million)7,167.808220F
Quantity1,050,000.00G
Accrued Interest827.50H = F*D/E*G/1000000

Note J12a:        Calculation of Cost

Trade ID
Quantity
Cost
Total Cost
IVM1001
1,000,000.00
1.020000
1,020,000.00
IVM1002
2,000,000.00
0.970000
1,940,000.00
3,000,000.00
0.986667
2,960,000.00
I
K=J/I
J
Trade ID
Quantity
Ave Cost
Total Cost
IVM1004
-1,050,000.00
0.986667
-1,036,000.00
L
K
M=L*K

Note J12c:        Calculation of Trading Income Price Impact

Quantity
Ave Cost
Selling Price
Profit/(Loss)
1,050,000.00
0.986667
1.015000
29,750.00
I
K
N
O = (N-K)*I

J13                Settlement Date Journals

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
IVM100425-Apr-03BINV: Due From BrokerSGD-1,066,577.051.000000SGD-1,066,577.05J13a
IVM100425-Apr-03BCash at BankSGD1,066,577.051.000000SGD1,066,577.05J13b

J14                Month End Revaluation of Bond Investment position

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
Portfolio/Sec30-Apr-03BINV: Investment Interest ReceivableSGD2,079.451.000000SGD2,079.45J14a
Portfolio/Sec30-Apr-03PINV: Investment Interest IncomeSGD-2,079.451.000000SGD-2,079.45J14b
Portfolio/Sec30-Apr-03BINV: Investment Bond Cost-RevaluationSGD5,500.001.000000SGD5,500.00J14c
Portfolio/Sec30-Apr-03PINV: Unrealised MTM-P/L - PriceSGD-5,500.001.000000SGD-5,500.00J14d

Note J14b:        Calculation of Accrued Interest

Last Coupon Date15-Apr-03A
Next Coupon Date15-Jul-03B
VDate30-Apr-03C
Days to Vdate (include 30-Apr)16D = C-A+1
Total Days (exclude 15-Jul)91E = B-A
Coupon PPM (Part Per Million)7,167.808220F
Quantity1,650,000.00G
Accrued Interest2,079.45H = F*D/E*G/1000000

Note J14d:       Calculation of unrealised Profit/Loss – Price

                              Calculation of Cost

Trade ID
Quantity
Cost
Total Cost
IVM1001
1,000,000.00
1.020000
1,020,000.00
IVM1002
2,000,000.00
0.970000
1,940,000.00
3,000,000.00
0.986667
2,960,000.00
I
K=J/I
J

                              Calculation of unrealised profit/loss (price impact)

Position (Qty)
Ave Cost
Market Price
Profit/(Loss)
1,650,000.00
0.986667
0.990000
5,500.00
I
K
L
M=(L-K)*I

EXCHANGE RATES

The following rates were used for this illustration.

Spot Rate

SGD1.000000

FREQUENTLY ASKED QUESTIONS

FAQ01.              When we buy a bond, why does the system journals the purchase interest to the interest income instead of interest receivable?

                            When purchasing a new bond normal journals would be:
                                       Dr Bond
                                       Dr Bond Premium
                                       Dr Interest Receivable
                                            Cr Bank

                            CS Lucas solution instead posted the follows:
                                       Dr Bond
                                       Dr Bond Premium
                                       Dr Investment Interest Income
                                            Cr Bank

The CS Lucas solution bond purchase journals complement the manner that subsequent month end journal of interest accruals will be book.

Month end interest accruals booked by CS Lucas system is not incremental from the date of purchase. Instead, it is from the last coupon date to the month end.

Month end interest in the CS Lucas solution are fully reversed at the beginning of the following month.

At the next month end, again the full accrual is made to that month end. The change in the accrual between the months is the net charge to the Income Statement.

Below is an illustration of what happens in a case of the bond purchase.

Dr / (Cr)
P/L Int IncomeB/S Int Receivable
Last Coupon Date13-Mar-12
Daily Interest (say)$10
Purchase Interest (Vdate)15-Apr-12
Days33
Purchase Interest$330$330
Month End
Days (inclusive)30-Apr-12
Days49
Accruals$490($490)$490
($160)$490
Note 1Note 2

Note 1: This 16 days interest from 15-Apr to 30-Apr (inclusive) at $10 per day. The period for which the bond is held. Total $160.

Note 2: This 49 days interest from 13-Mar to 30-Apr (inclusive) at $10 per day. This is the total amount that is accrued as receivable to the holder. Total $490.

FAQ02.              How does unsettled bond transaction affect the computation of interest accrual for accounting?

The example below shows how the interest accrual is computed.

Bond Coupon Schedule

blank

This bond has several positions as below.

Trade IDTickerTDateVDateB/S
Quantity
Price
Purchase Interest
Net Proceeds
IVM1001SIASP 3.228-May-1811-May-18Buy
3,000,000
101.55%
32,288.22
3,078,788.22
IVM1002SIASP 3.2211-May-1816-May-18Buy
1,500,000
101.55%
16,805.75
1,540,055.75
IVM1003SIASP 3.2217-May-1822-May-18Buy
1,000,000
101.45%
11,733.15
1,026,233.15
IVM1004SIASP 3.2231-May-185-Jun-18Buy
2,000,000
101.53%
25,936.44
2,056,536.44

Computation of interest accrual as at 31 May 2018

Settled Position*

Quantity5,500,000.00A
Last Coupon Date9-Jan-18B
Next Coupon Date9-Jul-18C
As At Date31-May-18D
Total Days181E = C-B
Days to As At Date143F = D-B+1
Coupon PPM15,967.67123 G
Accrued Interest69,384.38H = G/E*F*A/1000000

Unsettled Position*

Quantity2,000,000.00
Purchase Interest25,936.44I
Total Accrued Interest95,320.82J = H+I

*Settled position is all investment trades where VDate is before and on reporting as at date.

RELATED INFORMATION

CHANGE HISTORY

DateByChanges
12-Mar-2012CSCreation.
21-Jun-2016RJRewritten. Reformatted.
23-Aug-2018TSAdded FAQ02.
08-May-2020LTRe-formatting.
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