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Oct 31, 2019 at 07:30 AM

Zero Coupon bond from collateral money


I need some help in setting up zero-coupon bond that is different from standard zero coupon bond because it from collateral money and not an own investment. So the cash flows for original investment (at discounted amount) and final maturity (at nominal amount) is not recognized in accounting.

The expected system behavior is as below:

Par value [A] : $100 Face value [B] : $88 Discount [A] – [B] : $12 Coupon : 0% Tenor : 12 months Interest income to accrue per month : $12 / 12 months = $1 / month

Cash flows:

Purchase: No accounting document

Monthly accrual and reversal: Dr Interest receivable $1

Cr Interest revenue $1

Upon maturity: Dr Bank account $12

Cr Interest revenue $12

So far I have been able to:

  • 1.Stop FI posting for face value (purchase) and par value (maturity)
  • 2.Generate monthly accrual and reversal using amortization.

However, I am stuck where, upon maturity, it is required to post the difference of par value and face value.

Please provide any input. Thanks