BondCalc: Single Security On-Screen Calculations

There are two sections to the on-screen results:

• The first is columns with a row for each call date. The columns are user controllable and are the same 60 columns that are in the report generator. You can set it so that they only appear when they have results. The columns listed in the below are the default columns.
• Footnote section. Results will appear here if input exists that can calculate that number.
Results are calculated using the issue's day counting and the Output Compounding Basis on the Report Parameters Screen unless noted to be in the issue's native frequency (i.e. the issue's coupon frequency).

Description of Columns

```Call Dates - As input. A call in 30 days will have been added if

Call/Put Price: Percent - This is the call or put price on that
date, depending on how the flag is set on the second input page,
and depending if the security is a LYONs with puts. In the case
of preferred, with a price basis other than 100, it will be
converted to percent.

If calculated using the Make-whole convention it (1) gets the
future periods, (2) calculates the average life of remaining
principal flows, (3) finds base Treasury rate using implied
forward yield curve (unless set otherwise on yield curve input
screen) (gets rate from matrix 30 days before call date), (4)
this rate in issue's native compounding, (6) divides by the
principal and converts to percent, (8) subtracts accrued
interest if between coupon dates, (7) rounds price to three
decimals, and (9) floors it at 100 (or the accreted value if an
OID instrument).

Yield - as of the settlement date in DISPLAY frequency. It is the
internal rate of return of the expected cash flows. It is
sometimes the input but usually the program will flip a yield
input to a price, giving different yields to each call date. An
arrow '<' will point at the lowest yield (or highest if issue
has puts). Use column 227 if six decimals wanted.

Spread to Treasury/Before Taxes - The difference between the IRR,
before tax effects, and the base yield using each call date's
respective average life. The program finds a yield curve
designated either (1) in the Yield input field or (2) entered as
the base Treasury Yield Curve on ShftF6. If yield is in native
difference.

Static Spread - The spread that will make the present value of the
cash flow, when discounted at the Treasury spot rate plus the
spread, equal to the security's price. It is a measure of the
spread that the investor would realize over the entire Treasury
spot rate curve if the bond is held to the end and the spot
rates do not change. It is iteratively solved for.

Average Life Numeric - is the weighted average of the principal
flows to each date. Call price premium is not included. This
column is in years.

Average Life Date - The date corresponding with the average life
calculated using cash flows to each call date.

Duration (Modified) -  which is also called Adjusted, or Hicks
Duration. It is the most popular measure of volatility and is
computed by measuring the slope of the price-yield curve and
dividing by the price. (BondCalc takes a weighted average of
the present value of the cash flows and divides by one plus the
yield.)  It is related to Macaulay Duration which is the
weighted average of the present values of the cash flows but is
not divided by one plus the yield. Note, however, that its
usefulness is limited to small displacements in price/yield. It
is shown here in the display frequency.

Effective Yield (Horizon Return/IRR) - Calculated by using the
reinvestment rate input on the back input page, or if that is
blank, the global reinvestment rate found on the ShftF5
Parameter Screen.
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Footnotes

```Money Market - Additional numbers will be displayed if input on
Schema J, a call is nearby, or is bond in its last period:
- Discount Rate - if a Type 1 or 3 discount issue.
- Interest Bearing Rate - if the instrument is not ACT/360 day
counting this number will be displayed.
- CD Equivalent Rate - is the interest bearing rate using ACT/360
day counting.
- Bond Equivalent Yield  = 365 x CD Rate / 360
- Display Frequency IRR - conforms to the rest of the program.

Yield Value of a 1/32 and Price Value of an 01 - Yield value is in
basis points. Price value is in percent and is also called Risk.
Use columns 145 and 146 to see numbers to each call date.

Current Yield - this is simply current coupon divided by price. It
is an old measure and is only used today for floating rate issues
and high yield where principal redemption is uncertain. If the
security is being priced "all-in" then the "net" price will be used
in the divisor.

Floating Rate Issues - Additional numbers will be displayed:
- Spread for Life - bp differential between the return of the index
rate and that of the floating rate security from the settlement
date until the maturity date.
- Effective Margin - is also called Total Margin or Adjusted Simple
Margin technique. After measuring the value of the discount or
premium of the floater, this approach includes the impact of the
spread between the coupon and the base rate over the period of
time until the next coupon refixing. It is most effective if the
coupon and the base rate are substanially different. It is the
same as Spread for Life when on a coupon date.
enhancement over the previous where the spread relationship is
reflected over the entire life of the floater, not just to the
next reset date. However it makes some dramatic long-term
- YTM Spread - is the difference between the YTM of the floating
rate security and that of the index rate.
- Discounted Margin - represents the increment over the index rate
that is returned by an investment in the floating rate issue. It
is popular in the European market.
- Breakeven Index Rate - Needs targeted YTM input. [Not yet
available.]

Native Yields - BondCalc displays results in the compounding
frequency that is globally set. These notes display in the issue's
frequency. Columns 23 (before taxes) and 24 (after tax effects)
list them so each can be backsolved on.

Days to Go - is displayed for money market instruments and bonds in
their last period. Column number 302 is available for all bonds.

Accrued Interest/Dividends - Bond prices are usually quoted as a
flat price without accrued interest. At the time of payment the
accrued is added in to get the true market/present value.
Preferred Stock, on the other hand, is quoted with a full price.
The amount is shown here as a percent with a note when it is
included in the price.

Daily Interest - Earned each day.

Called off Accretion Curve - this note will appear when you have a
DIB/Zero-Pay or Zero and the entered Call Prices are multiplied
against the accreted value being paid out.

Accretion Yield - This is included for an OID instrument as issue
information instead of yield may have been input.

Current Accreted Price - If the issue was issued at a discount and
issuance info was entered then this number is displayed.

Actual Redemption Prices - If the issue call prices were a
percentage of the accretion curve then these will be the actual
call prices paid. (Accreted Value X Call Price)

Mortgage Payment - will be displayed when the bond is level debt. If
there is a Service Fee then a range of net payments will be shown.

Implied Prepayment Speeds - If a Pool Factor is entered on a mortgage
backed security (Screen H) then BondCalc will calculate the CPR
and SMM that this factor implies.

Make-whole Rate -  If the bond has a Make-whole Call provision this
is the Treasury rate or rates that were used. It was either input
or interpolated from a scenario. (A Make-whole provision provides
for a call price great enough so the investor can invest it in
Treasuries and get the same return.)  If interpolated it uses
average life for sinking fund issues and a weighted average of
each member if a serial bond. A range of rates will display for a
serial (covering first MW call only).

Rate.

OAS - To turn on you must (1) have a global yield curve designated,
and (2) enter a volatility on the Ctrl-O OAS Control Screen.

Volatility - as input.
Option Value
Option Free: Yield
Effective Duration
Risk
Convexity

ESOP Yield with Coupon Grossed Up - Using gross-up tax factor with
all decimals. It is calculated to highlighted row. Also see
columns 47 and 304.

Non DCF Yield (on Straight Bond) to Average Life - If there are
sinking funds or prepayments, only ONE coupon rate, and no delay, a
yield of a hypothetical straight issue maturing on the average life
date will be displayed (in DISPLAY compounding frequency). It does
not include doubled-up sinking funds. Note that the phantom bond
has coupon payments in sync with your issue and has a fractional
period at the end (like an MTN). Also see columns 46 and 301.

Price represents a Discount Rate - BondCalc normally assumes that an
inputted yield is a compound number with interest on the present
value. Some serial zero coupon notes can be priced at a discount
from their future value. This method does not compound but just
sums up the interest earned per annum. To input a rate this way
add +S after the inputted yield.

Combination Price Using F9 Treasury Yields - If a sinking fund issue
(or serial) was entered you have the option of entering a Treasury
Yield Curve with a rate corresponding to each sinking fund. It
will then treat it is a serial issue and price each S.F.
individually and combine to a number here. This is only available
for a single coupon rate (unless serial). Use columns 34 and 35 to
see to each call date.

Convertible Info -
Stock Price - as found in ^E Equity database.
Conversion Price - Par value of convert (or sometimes issue price)
divided by the conversion ratio.
Conversion Premium - The percentage that the Conversion Price is
over the Stock Price.
Convertible Payback - see discussion on help behind B selection
Premium Payback Period - or Breakeven Time. It is time it takes
to recover the premium per share
Premium Over Straight Value - Must enter spread on F11 for program
to calculate Straight Value of security.

Return from Purchase - If a purchase price and purchase date in the
past are entered, this IRR will be produced by setting the
settlement date to the purchase date and ending on the current
date with the current price.

Pretax Equivalent Return from Purchase - Like the above but calcu-
lated only when the security has a tax preference.

Horizon Return
--------------
Horizon Date - The Horizon Return Analysis assumes that you hold the
security and then sell it at some Horizon Date selected in the
future or, by default, it will end on the maturity date.

Horizon Price/Yield - the first of these two numbers is what you
inputted and the second is calculated from the first using the
Horizon Date as the Settlement Date.

Reinvestment Rate(s) - This is the rate (or rates if a Scenario
name was entered) that all cash flows are reinvested at until the
Horizon Date. It is in the issue's compounding basis.

Total Return - is the Modified IRR of the initial security market
value and the future value on the Horizon Date. It is in the
same day counting as the underlying security and in the Display
Compounding Frequency (See ShftF5). It is also available to each
Call Date by using column 22.

Profit/(Loss) From Stripping Security - based on yields and spreads
inputted on Alt-Z popup. The cash flows behind this calculation
are on the second page of the report menu.

Combined Return with Reserve Security - Also see column 42.

Stripped Yield on Brady Bonds - or Pure Country Yield. See report
for explanation of calculations. The spread is calculated using
the duration scale for the Treasury curve and cannot be
backsolved on.

Make-Whole Yield - Indenture explainations for make-whole call
calculations usually have a convention to net accrued interest
against the next interest payment before calculating the cash flow
net present value. This is uneconomic to the issuer. The
difference shown is the extra value that is received by the holder
in the call. This yield will only appear if the +M backsolving
flag is on in the yield field.

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