Most of the $4K difference is for the increased principal value you purchased. The index ratio of the 2-1/8% April 2029 TIPS has increased to 1.01332 on the 6/28/2024 issue date of your purchase. This means you bought $202,664 of principal, not just $200,000. The other components of the $4K difference are the premium to par value and accrued interest pointed out by Factual Fran above.Last week I bid $200k to buy 5 year TIPS. This week my bank withdrew over $204k to cover the purchase. Where did the $4k go???
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202,664 = 200000 * 1.01332 = principal purchased 2,664 = 202664 - 200000 = additional principal purchased 686 = 202664 * (100.33848 - 100) / 100 = premium to par value 871 = 202664 * (2.125% / 2) * (74 / 183) = accrued interest 4,221 = 2664 + 686 + 871 = total cost vs face valueCode:
Row Col A Col B Formula in Column B 2 Face value purchased 200,000 3 Settlement 6/28/2024 4 Matures 4/15/2029 5 Coupon 2.125% 6 Price (unadjusted) 100.338480 7 Yield to maturity 2.050% =YIELD(B3,B4,B5,B6,100,2,1) [1] 8 Index ratio 6/28/2024 1.01332Code:
9 Principal purchased 202,664.00 =B2*B8 10 Principal cost 203,349.98 =B9*(B6/100) 11 Interest period start 4/15/2024 =COUPPCD(B3,B4,2,1) [2] 12 Interest period end 10/15/2024 =COUPNCD(B3,B4,2,1) [2] 13 Days in period 183 =B12-B11 14 Days before settlement 74 =B3-B11 15 Accrued interest 870.74 =B9*(B5/2)*(B14/B13) 16 Cost incl accrued int 204,220.71 =B10+B15- Yield to maturity not needed to determine total cost. Included just to show how it can be calculated based on the unadjusted price. Calculated with Excel YIELD function.
- Start and end of the current interest period calculated with the COUPPCD and COUPNCD functions.
Statistics: Posted by #Cruncher — Sat Jun 29, 2024 7:35 am — Replies 3 — Views 290
