1. Asset Liability Management Cloud User Guide
  2. Business Rules Administration
  3. Application Specific Rules
  4. Discount Methods
  5. Discount Method Examples
  6. Spot Input

4.3.9.7.1 Spot Input

In the Spot Input Method, the discount factor does not vary with Forecast Rate - interest rate scenarios. The discount factor calculations assume the input interest rate to reflect a format of zero coupon yield, annual compounding, and actual/actual accrual basis.

Spot Input Rate = 6.00%

The formula for the market value of the account, for any rate scenario, is:

Market Value = Cash Flow1/ (1 + 0.06) + Cash Flow 2 / ((1 + 0.06)^2)

Cash Flow1 is the cash flow at the end of year 1. Cash Flow2 is the Cash Flow at the end of year 2.