Nominal Interest

Use

You can use this condition type to enter fixed and variable nominal interest. If you use variable interest rates, you also require the condition type for Interest Rate Adjustment . Here, you define the frequency of the interest rate adjustment.

Procedure

  1. Enter the Effective From date for the interest item.

  2. This date is the first date of the calculation period for the interest payment.

  3. Enter the interest rate.

  4. If you want to link a variable interest rate to a reference interest rate by adding to the reference interest rate or by simple multiplication, you can enter a percentage rate in the Percent field and then branch to the Condition Detail Screen. You select the reference interest rate on the Amounts tab page.

    Variable interest rate = reference interest rate (EUR_06_M_M) + 2%

    Enter the value 2 in the Percentage field, select 'EUR_06_M_M' as a reference interest rate and enter a + sign in the field infront.

    To define more complex formulas for the calculation of variable interest rates, choose Formula at the top of the Amounts tab page. Select a formula in the next screen and in the subsequant screen determine the values for the variables.

    You define the intervals for the interest rate adjustment and interest fixing in the condition type Interest Rate Adjustment .

  5. You can enter the frequency for the interest payments in two ways:

    1. Enter the frequency in months manually in the Frq field.

    2. Via the PF field (payment form), you can specify whether the interest payment is due at the start of the period, mid-period or at the end of the period. In this case, you do not need to enter a calculation date or due date. These dates are calculated automatically by the system.

    3. Choose a value for the PE field (exact payment form).

    The payment forms delivered in sample Customizing result in the following payment dates:

    Short name

    Long name

    Resulting payment date(s)

    JM

    Mid-year

    06/30

    JN

    Yearly at end of period

    12/31

    JV

    Yearly at start of period

    01/01.

    MM

    Middle of the month

    01/15, 02/15, 03/15, 04/15...

    MN

    Monthly at end of period

    01/31, 02/28, 03/31, 04/30....

    MV

    Monthly at start of period

    01/01., 02/01, 03/01, 04/01...

    You can define your own payment forms in Customizing for Loans by choosing Define Payment Form.

  7. Calc.Date (calculation date = last day of the current interest period)

  8. If you enter staggered interest rates, make sure there are no gaps or overlaps between the individual condition items. To avoid an overlap, for example, check that the effective from date of the next interest item is not the same as the calculation date of the previous item.

  9. Due date (= date of the first interest payment)

  10. You flag fields MC and ED if you want the calculation date or the due date to fall on the last day of the month. If you select these fields, the respective day is always the last day of the month, even if you enter another date somewhere else.

  11. Field CR enables you to choose whether to shift the calculation date or the due date to a working day if the date entered is not a working day. If you opt to shift the due date, you have to select an appropriate calendar from the Dates tab page.

  12. Since the calculation date is used as a basis for calculating financial mathematical transactions, you should leave this field blank or enter 0.

  13. Currency (of the interest payment)

  14. If you activate the IS indicator (immediate settlement), the interest is capitalized.

  15. In the CF (condition form) field, you can define the condition as a zero condition, statistical condition or fixed condition.

    1. Zero condition

    2. When you enter a zero condition, you can end the effectiveness of a condition item at any date. To do this, enter a new condition item of the same condition type, enter the required Effective from date and select it as a zero condition. This enables you to represent, for example, the suspension of interest payments one year before the final due date. To reactivate calculations for this condition type, you enter a subsequent condition item.

    3. Fixed condition

    4. Condition items with values which should remain unchanged for the financial mathematics calculations are "fixed" for alternative calculations such as the calculation of the nominal interest rate on the basis of a specified effective interest rate.

    5. Statististical condition

      This means that the condition item is ignored. In other words, no flow records are generated in the cash flow. Statistical conditions are usually used as a memo item in the condition overview.

Notes for Processing

You can display the due date, payment date, calculation period and the resulting number of days for the interest calculation by choosing the Dates button in the Condition Detail Screen.