4.5.7 Specify Schedules for a Deal with a Fixed Interest Rate

For components of deals with a fixed rate of interest, you will not have to define interest rate revision schedules. The schedules defined for each component at the time of product definition apply to the deal. However, you can change the frequency, number, unit and the start date to suit the specific requirements of the deal that you are processing. Specify the amount only if the schedule defined, involves the principal component or a special interest. But in the case of Money Market deals, the principal is repaid at Maturity.

The amount for interest, commission and fee components (if they are rates) will be calculated by the system automatically, depending on the start date, number of schedules, frequency and repayment amount of the principal. However, an amount is entered here for interest only if the Interest Calculation Method is defined as Special. Input the fee amount only if it is a flat fee. For a money market deal, you can define repayment schedules that:

• Fall due at regular intervals, or
• At irregular intervals

Now, if you want to define schedules that fall due at regular intervals, all you have to do is, for a component, specify the start date, the frequency, the unit and the principal amount. Since you would have already registered the Maturity Date of the money market deal (for a fixed maturity type), in the Contract Details screen, the schedules would automatically spread out into equal intervals. Based on this information, the system calculates the dates on which the repayments or interest revisions fall due.

For example, consider the following details for a deal: A borrowing of USD 100,000 comes into effect on 1 January 1998 and matures on 31 October 1998. Suppose you want to have ten monthly schedules for interest payment, you have to specify the Start Date as 31 January 1998, the frequency as monthly, the unit as 1. The interest schedules would be spread out over ten months and would fall due to every month-end.

Now, you have a 15-month borrowing beginning 1 January 1998 and ending 31 March 1999.

Suppose, you want to define four quarterly schedules and three monthly schedules for interest payment of this loan, these are irregular schedules, and the ‘Number’ field assumes importance here. Here, for the component interest, you have to give the Start Date as 31 March 1998, the frequency as quarterly and the unit as 1. The number of such schedules will be four. Hence your quarterly schedule dates will be calculated as:

• 31 March 1998 (Start Date)
• 30 June 1998
• 30 September 1998
• 31 December 1998.

You have to specify for the same component - the interest - the Start date as 31 January 1999, the frequency as monthly, the unit as 1, and the number as ‘3’, if you want to fix three monthly payment schedules after 31 December 1998. They are calculated as falling due on:

• 31 January 1999
• 28 February 1999
• 31 March 1999