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Set the Amortization Method for Your Security Types

Introduction

This page is step one in Workflow: Set Up Securities and Accounts for the Amortization and Accretion Report. It provides steps on how to set the amortization type for securities.

Tamarac Reporting comes pre-configured with the most common amortization method for each security type.

Security Type	Default Amortization Method
Mortgage-backed	Straight Line
Fixed income	Scientific

Before you enable the amortization calculation for your accounts, ensure that your security types are set to use the desired amortization method.

Scientific Method versus Straight Line Amortization

The following table describes some of the differences between scientific method and straight line amortization.

	Scientific Method Amortization	Straight Line Amortization
Security Types	Most fixed income securities. Although the Scientific method is generally recommended for amortizing fixed income securities, there are exceptions.	Mortgage-backed securities Fixed income securities
Adjustment Distribution	Adjustments gradually increase each period	Adjustments evenly distributed across all periods
Requirements	For each trade lot being amortized: Interest rate Beginning cost basis Yield at purchase. Tamarac Reporting calculates the Yield to Maturity (cost) value based upon the security’s Amortize/Accrete To setting.	For each trade lot being amortized: Beginning cost basis
Learn More	Scientific method	Straight Line method

To set the amortization method by security type:

On the Setup menu, under Security Settings, click Categories.
Click Edit Categories next to the Security Type category.
Click Edit next to the security type where you want to set the amortization method.
In the Amortization method list, choose either Scientific or Straight Line.