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
Leap Year (Y) – Indicates that the system will compute the interest based on the
number of calendar days in the year.

Leap Date (D) – Indicates that the system will use the ACT/ACT–FRF Interest Method
to compute the interest.
Note
This field is enabled only if the Denominator Basis value is Per Annum and the Denominator Method is ACTUAL.
ACT/ACT–FRF Interest Method
In ACT/ACT–FRF Interest Method, the Numerator will be the actual number of days between
two coupon dates and the denominator will be 366 under the following cases:

If 29th February falls between the duration of two coupon dates (i.e. previous coupon
date and next coupon date)

If the previous coupon date and the next coupon date fall in different years (annual
frequency, next coupon dates in immediate subsequent year of previous coupon date)

If the coupon schedule is not periodic and spreads across multiple years. The system
will apply 366 as the denominator for all the years for computing the day count even if
one instance of 29th February falls in between the coupon dates.
Let us understand the formula applied for calculating the interest in ACT/ACT–FRF method
with an example:
Consider the following facts:
A security purchased for 10 million at a rate of 5% p.a with the coupon date of 15th January.
Case 1:
Assume the following parameters are maintained for a yearly coupon:

Nominal - 10,000,000
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Interest Rate – 5% per Annum

Coupon Frequency – Annual

Previous Coupon Date – 15/01/1999

Next Coupon Date – 15/01/2000

Numerator Method – ACTUAL

Denominator Method – ACTUAL

Denominator Basis – Per Annum
In case 366 basis is Leap Year:
The interest is calculated based on the day count derived for each of the two years in which
the coupon date fall and the formula applied is:
10,000,000 x 5/100 x 350/365 + 10,000,000 x 5/100 x 15/366
In case 366 basis is Leap Date:
Here the system will apply ACT/ACT–FRF interest method to compute the coupon interest.
Since this period does not include 29th February, the denominator for interest calculation will
be 365 and the formula will be:
10,000,000 x 5/100 x 365/365
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