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TimeValue Software Blog

Actual over Actual Calculation

By Martel Pellerin

In the various versions of TValue, we currently do not do an actual over actual computation where the days and the year length factor in a 366 day year.

There is a workaround in TValue that may be a little painful but will do the proper calculation. Effectively, you need to adjust the interest rate on the first day of the leap year based on a 365/366 basis and then change the interest rate back to the normal Nominal Annual Rate at the beginning of the non leap year. If you cross over multiple leap years, you would have to do it for each leap year.

In the example below in TValue 6, the Nominal Annual Rate for the loan was 5%. We used the 365/366 ratio of .997268 and multiplied it by the 5% to get a modified rate of 4.98634% to use as the Nominal Annual Rate for the leap year 2020. Effective 1/1/21, we did a Rate Change to the normal 5% rate.

Actual Over Actual Blog image

The Payments were entered with “U” for the Amount and 36 for the Number. We did the Rate Change on 1/1/21 on line 2. TValue will sort the cash flows chronologically and put the rate changes in the right sequence to do the proper calculation. With this workaround, the interest calculations will be on a 366/366 equivalent during the rate change/leap year.

Please note this would be for an Exact Days calculation only.

If you need help with this calculation, feel free to call our Support at 800-426-4741.