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EDM: Interest Amount calculation incorrect using Floating Rate and Date Override (Doc ID 2471283.1)

Last updated on DECEMBER 07, 2020

Applies to:

PeopleSoft Enterprise FIN Deal Management - Version 9.2 to 9.2 [Release 9]
Information in this document applies to any platform.

Symptoms

Configured an Instrument/Template as a revolving credit line that has a daily resetting Floating Rate that pays monthly on the first business day of the month with interest owed beginning with the first day of borrowing.

Unfortunately, Interest amount calculation is incorrect for a Deal when using a Floating Rate Type with the Interest Date Rule Override configuration and Reset Date = Set in Arrears.

STEPS
1.  Create an Instrument Type as follows:
a.  Instrument Base Type = Interest Rate Physical
b.  Debt/Investment = Debt
c.  Rate Type = Floating
d.  Reset Index = LIBOR
e.  Interest Calculation = Interest Bearing
f.  Interest Frequency = Monthly
g.  Reset Frequency = Daily
h.  Reset Date = Set in Arrears
i.  Drawn on Line of Credit
2.  Create an Instrument Template from the above Instrument Type
3.  Create a Facilities for Issue Debt with Facility Type = Line of Credit
4.  Market Rate for Index = LIBOR for USD has 5 different Effective Dates associated to 5 different Rates
5.  Create a Deal specifying the above Instrument Type, Instrument Template and Facility ID as follows:
a.  Par Amount and Settlement Amount = 40,700,000
b.  Under Interest Date Rule, Override Month and Day is selected with Coupon Month = 1 and Coupon Day = 1
6.  Save the Deal
7.  Click on Cashflows
8.  Re-save the Deal
9.  Run Automated Rate Reset with From and To Date = 06/29/2018
10.  Display the Deal and click Cashflows
11.  Cashflow created on 07/02/2018 with Interest = -4,770.94, which is correct
12.  Add a Paydown with Payment Date = 07/02/2018 and Principal Amount = 40,700,000
13.  Run Automated Rate Reset with From and To Date = 07/02/2018
14.  Display the Deal and click Cashflows
15.  Cashflow created on 08/01/2018 with Interest = -2,385.47, which is correct
16.  Add a Drawdown with Payment Date = 07/03/2018 and Principal Amount = 20,000,000
17.  Add a Paydown with Payment Date = 07/12/2018 and Principal Amount = 5,000,000
18.  Add a Drawdown with Payment Date = 07/23/2018 and Principal Amount = 10,000,000
19.  Run Automated Rate Reset with From Date = 07/03/2018 and To Date = 07/31/2018
20.  Display the Deal and click Cashflows
21.  Cashflow created on 08/01/2018 with Interest = -35,611.88, which is incorrect.  
22.  Interest should be -37,114.64

Cause

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In this Document
Symptoms
Cause
Solution
References


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