Lesson 3 of 25 · 7 min
What moves between statements
The figure that moves between statements is the balance by a known daily increment, and the book by every print.
The figure that moves between statements is not a mystery quantity the next letter will reveal. It is two running totals. The balance moves by the day's accrual, $372.75 on 1 April at 7.22 percent Act/360, and by any draw or repayment. The book moves by each last sale on the five names. Everything else on the March letter — the threshold, the day-count, the spread, the unit counts — is a term, and a term is still unless a later document revises it.
After seven days of accrual and no draws, the balance is $1,858,563.47 + 7 × $372.75, more carefully $1,858,563.47 + $2,609.22 = $1,861,172.69. The trigger that belongs to that morning is $1,861,172.69 ÷ 0.70 = $2,658,818.13. That is $3,727.46 above the 31 March trigger, produced entirely by interest. The book, if every price is unchanged, has not moved at all.
If Calder alone prints $5.15 lower, 3,100 shares move the book by $15,965 and leave the balance untouched. The two movers are independent. Adding them in the same week is a later lesson. The mechanism in this one is the split: interest is a calendar quantity, prices are a print quantity, and a statement is a snapshot of both after they have already moved.
A letter describes a closed interval. Between two letters the interval is still running, and the two running totals are the balance and the book.
Key terms
- Balance path
- The loan amount as it accrues interest and records draws or repayments. Between statements it moves even when no letter is in the post.
- Book path
- The pledged market value as last sales print. Independent of the balance path unless a sale or a corporate action changes units.
- Term
- A contractual input that stays put until a document revises it: threshold, day-count, spread, unit counts, printed advance rates.
Worked example
Seven days of interest, prices held flat
March close $1,858,563.47, rate 7.22 percent, Act/360, no draws, market value still $6,032,795.
- Seven days of accrual
- $2,609.22
- Balance on the morning of the eighth day
- $1,861,172.69
- Trigger on that morning
- $2,658,818.13
- Trigger movement from 31 March
- $3,727.46
- Book movement
- $0.00
7 × ($1,858,563.47 × 0.0722 ÷ 360).
$1,861,172.69 ÷ 0.70.
Interest alone.
Prices held flat by construction.
The trigger rose by $3,727.46 without a single price changing. That movement is the balance path, and it does not wait for a letter.
Check yourself
Seven days pass after the March close. No draws, no price changes, rate still 7.22 percent Act/360. What has moved?
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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.