Hierarchy
SAP_BS_FND (Software Component) SAP Business Suite Foundation⤷
CA-FS-MKD (Application Component) Basic Market Data⤷
/BA1/F4_YC (Package) Market Data: Yield Curves
Basic Data
| Data Element | /BA1/F4_DTE_COMP_FREQ |
| Short Description | Compounding Frequency |
Data Type
| Category of Dictionary Type | D | Domain |
| Type of Object Referenced | No Information | |
| Domain / Name of Reference Type | /BA1/F4_COMP_FREQ | |
| Data Type | CHAR | Character String |
| Length | 2 | |
| Decimal Places | 0 | |
| Output Length | 2 | |
| Value Table |
Further Characteristics
| Search Help: Name | ||
| Search Help: Parameters | ||
| Parameter ID | ||
| Default Component name | ||
| Change document | ||
| No Input History | ||
| Basic direction is set to LTR | ||
| No BIDI Filtering |
Field Label
| Length | Field Label | |
| Short | 10 | CompFreq |
| Medium | 15 | CompFreq |
| Long | 20 | Compounding Frqncy |
| Heading | 8 | CompFreq |
Documentation
Definition
Determines how frequently interest is calculated.
The following options are available here:
- Compounding frequency is same as payment frequency. In the case of zero interest rates with a maturity of more than one year, this option assumes that compounding occurs once a year.
- Annual compounding (m = 1)
- Half-yearly compounding (m = 2)
- Quarterly compounding (m = 4)
- Monthly compounding (m = 12)
- Daily compounding (m = 365)
- Continuous compounding (m = infinity)
Certain restrictions apply to the options for annual, half-yearly, quarterly, monthly, daily, and continuous compounding:
- In the case of yield curves, you must set up "exponential accrued interest, full coupons" for the par bond method.
- In the case of reference interest rates, the maturity must be a whole-number multiple of the payment frequency (for example, if the payment frequency is "half-yearly interest payments," then you cannot combine this with a maturity of 9 months for the compounding frequency "quarterly compounding").
The following formula is used to convert an interest rate r1 from compounding frequency m1 into compounding frequency m2:
(1 + r1 / m1 ) ^ m1 = (1 + r2 / m2 ) ^ m2
At this point, the payment frequency can also be deployed instead of the compounding frequency. Example:
You want to convert interest rate r1 = 4%, which has a half-yearly payment frequency, into a daily compounding frequency. This means that:
- m1 = 2 (half-yearly payment frequency),
- m2 = 365 (daily compounding),
- r2 = 3.96074034... %.
Example of Different Compounding Frequencies:
A mortgage loan with a monthly payment frequency is offered at a nominal interest rate of 6%. In this case, it is assumed that the nominal interest rate is accrued on a monthly basis (that is, the frequency is the same as the payment frequency). Assuming that this loan is disbursed in full, and that no other charges are incurred, the effective interest rate for this loan is 6.17%.
It is assumed that compounding occurs annually for the effective interest rate. If you invest 100 currency units at a monthly return of 6% for one year, then the total return will be 106.17 if you take compound interest into account. This represents an effective interest rate of 6.17%.
Use
Dependencies
History
| Last changed by/on | SAP | 20110908 |
| SAP Release Created in | 10 |
