Loan relationship and Money market: Difference between pages

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A loan relationship exists where a party holds or owes a debt as a result of lending or borrowing money.
''Financial markets.''


For UK tax purposes, loan relationships are categorised into Non trading loans and Trading loans.
Money markets trade short-term financial instruments, generally with a life up to one year.
 
Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.
 
Important short term interest conventions are:
 
 
1.
 
For GBP yield instruments: Actual / 365 fixed days.
 
So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365.
 
This applies in leap years as well as in normal years.
 
 
<span style="color:#4B0082">'''Example 1'''</span>
 
A 272 day GBP yield instrument quoted at 4% would pay periodic interest of:
 
= 4% x 272 / 365
 
= 2.9808% per 272 day period.
 
 
 
2.
 
For EUR, USD and most other currencies yield instruments: Actual / 360 days.
 
So Simple periodic interest = Quoted nominal annual rate x [Actual days] / 360.
 
 
<span style="color:#4B0082">'''Example 2'''</span>
 
A 272 day USD yield instrument quoted at 4% pays periodic interest of:
 
= 4% x 272 / 360
 
= 3.0222% per 272 day period.




== See also ==
== See also ==
* [[Accruals basis]]
* [[ACT/360]]
* [[Back-to-back loan]]
* [[ACT/365 fixed]]
* [[Debt]]
* [[Capital]]
* [[Non trading loan]]
* [[Capital instrument]]
* [[Trading loan]]
* [[Capital market]]
* [[Depo market]]
* [[European Money Markets Institute]]
* [[Financial asset]]
* [[Financial liability]]
* [[Financial markets]]
* [[International money market]]
* [[Leap year]]
* [[Market]]
* [[Money market fund]]
* [[Money market fund reform: a light at the end of the tunnel?]]
* [[Money market instrument]]
* [[Money market lines]]
* [[Nominal annual rate]]
* [[Primary market]]
* [[Secondary market]]
* [[Simple interest]]
 
[[Category:Long_term_funding]]

Latest revision as of 14:06, 11 August 2021

Financial markets.

Money markets trade short-term financial instruments, generally with a life up to one year.

Securities are generally quoted on the basis of a simple nominal annual interest rate (or yield) or a simple nominal annual discount rate.

Important short term interest conventions are:


1.

For GBP yield instruments: Actual / 365 fixed days.

So Simple periodic interest = Quoted nominal annual rate x (Actual days) / 365.

This applies in leap years as well as in normal years.


Example 1

A 272 day GBP yield instrument quoted at 4% would pay periodic interest of:

= 4% x 272 / 365

= 2.9808% per 272 day period.


2.

For EUR, USD and most other currencies yield instruments: Actual / 360 days.

So Simple periodic interest = Quoted nominal annual rate x [Actual days] / 360.


Example 2

A 272 day USD yield instrument quoted at 4% pays periodic interest of:

= 4% x 272 / 360

= 3.0222% per 272 day period.


See also