Lesson 2 of 25 · 6 min

What is computable on the first day of a month

Last month's close and last month's schedule are enough for a rate and a headroom before a new price prints.

1 April opens with a known balance of $1,858,563.47, a known book of $6,032,795, and a known schedule of five advance rates. No April price has printed. The figures that are already determined are the ones that do not need a new mark: the opening balance, the opening trigger of $2,655,090.67, the opening headroom of 55.99 percent, and the blended advance of 54.32 percent carried forward from March.

The rate for the first day is also determined if the index and the spread have not been revised overnight. March closed at 7.22 percent. One day on Act/360 is $1,858,563.47 × 0.0722 ÷ 360 = $372.75. That increment is implied by the last known rate and the last known balance. It does not wait for a letter dated early May.

What is not determined on the morning of the first is anything that requires a new print: today's market value, today's lending value, and therefore today's LTV. Those wait on the five prices. The schedule you apply to them, until a new letter revises it, is last month's schedule. Track 5 lesson 17 listed the figures a statement withholds; the first-of-month set is the complement — the figures that are already in hand.

The first day of a month splits the book into numbers that are already finished and numbers that are waiting on a print. Confusing the two is how a running reconstruction starts on the wrong inputs.

Key terms

First-of-month set: The figures fixed by last month's close: opening balance, opening trigger, carried-forward schedule, and the day's accrual at the last known rate.
Carried-forward schedule: The last printed advance rates, held until a later letter revises them. They are an assumption, not a confirmation.

Worked example

What 1 April already contains

March close carried into 1 April. No new price. Rate still 7.22 percent, Act/360, threshold still 70 percent of market value.

Opening balance: $1,858,563.47
Opening trigger: $2,655,090.67
Opening headroom: 55.99%
One day's interest: $372.75
Today's market value: Not yet determined

Four of the five lines are finished before the market opens. The fifth is the only one that requires a price.

Check yourself

On the morning of 1 April, before any April price prints, which figure is already determined?

Today's market value
Today's lending value
One day's interest at 7.22 percent on $1,858,563.47
A revised Calder advance rate

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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.