fvMoneyMarketInstrUsingAOR {bondAnalyst}

Calculates Future Value of Money Market Instrument using Add-on Rate (AOR)

Description

Calculates Future Value of Money Market Instrument using Add-on Rate (AOR)

Usage

fvMoneyMarketInstrUsingAOR(pvMmi, daysToMaturity, daysInYear, AOR)

Arguments

pvMmi

A number.

daysToMaturity

A number.

daysInYear

A number.

AOR

A number.

Details

As explained by Adams and Smith (2019), suppose that a Canadian pension fund buys a 180-day bankers⁠'⁠ acceptance (BA) with a quoted add-on rate of 4.38 percent for a 365-day year. If the initial principal amount is 10 million dollars, the redemption amount due at maturity is found is 10,216,000 dollars which is calculated as the principal of 10 million dollars plus interest of 216,000 dollars. The interest is calculated as the principal times the fraction of the year times the annual add-on rate. It is added to the principal to determine the redemption amount. In light of the available information, the method fvMoneyMarketInstrUsingAOR() is developed to compute the Future Value of Money Market Instrument using Add-on Rate (AOR) for the values passed to its four arguments. Here, pvMmi is present value of the Money Market Instrument, daysToMaturity is number of days till the maturity, daysInYear is taken to be 365, and AOR is Add-on Rate.

Value

Input values to four arguments pvMmi ,daysToMaturity, daysInYear and AOR.

Author(s)

MaheshP Kumar, [e-mail]

References

Adams,J.F. & Smith,D.J.(2019). Introduction to fixed-income valuation. In CFA Program Curriculum 2020 Level I Volumes 1-6. (Vol. 5, pp. 107-151). Wiley Professional Development (P&T). ISBN 9781119593577, https://bookshelf.vitalsource.com/books/9781119593577

Examples

fvMoneyMarketInstrUsingAOR(pvMmi=10000000,daysToMaturity=180,daysInYear=365,AOR=0.0438)