Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide

SOLUTION TO PROBLEM 1: INTEREST RATE CAP—PAY

T-1 On entering into interest rate cap trade (off balance sheet entry):

T-2 On accounting for premium on interest rate cap trade:

T-3 On accounting for receipt of the premium:

T-4 On accounting for interest payable on interest rate cap:

T-5 On valuation of interest rate cap as on date:

T-6 On reversal of existing net present value of interest rate cap on the next valuation date:

T-7 On valuation of interest rate cap as on date:

T-8 On accounting of interest accrued on valuation date:

T-9 On reversal of interest accrued on valuation date:

T-10 ...