Re: How do I record a loan?

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In Reply to: How do I record a loan? posted by Alvaro Illarze on October 03, 1999 at 15:49:46:

: Hello:
: I'm trying to record a loan in version 4.1 of FM, and I don't know how.
: I'll put a simplified example. I asked for a loan of U$S 10,000 in two
: semester payments of U$S 5,500
: My first attempt was to create a new investment of "Bond" type
: (being the loan a fixed rate investment, I thought bond will best fit
: this). I thought the fields to fill would be something like: initial
: amount and rate, but there were price and shares; so I filled this way:
: in shares = (minus) the amount of the loan (minus because I receive the money)
: the price = $1 (as the price of the dollar is 1)

: Then in both pay backs, I record:
: Buy 5,000 shares (half of principal) of the investment
: price= $1.1 (to account for the interests)

: This doesn't seems to work, because if I ask for a yield graph, I
: obtain a positive yield (wish it was this way :-)), and if I see
: my portfolio value, it doesn't makes sense 'cos I just have two
: prices for the loan, 1 and 1.1, and this doesn't account for the
: evolution of the loan (I'm not asking to see the daily evolution
: of the loan, but there should be a way to see the actual value of
: the bond, without writing down 360 prices, and I don't find it).

: Probably if I had invested in a bond, I would have seen the same
: problem but the other way round; is there a way to - say - make
: the prices a line interpolation from the first price to the last
: taking into consideration the intermediate interest payments?

:
: I like this product, is preety good. Thanks a lot, and hope to
: hear from you.

: Alvaro

: P.S.: After I wrote this, I found Post 992 from Philippe, called "monitoring
: Bonds and Alike", and though I'm not asking for that complexity (yet),
: I strongly support his beg.

Hi Alvaro,
FM isn't really intended to be a tool for tracking a loan, although
you can do it. I would suggest treating it as a cash account. Keep
the share price at a constant $1. When you receive money, record a sell.
As interest accrues, record negative reinvested distributions. When
you make payments, record a buy.

Thanks for the feedback on wanting more support for bonds.

Thanks,
Mark
--
Mark Beiley

Fund Manager for Windows 3.1x/95/98/NT

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