Following are definitions for terms used in this procedure.
Fixed Income Securities
Marketable securities purchased primarily for their current yield rather than capital appreciation potential. These securities customarily have a stated interest rate payable periodically. Examples: first mortgage bonds, treasury notes, municipal bonds and corporate notes. Specifically excluded from this classification are convertible bonds and preferred stock.
The purchase price of the securities plus any brokerage commissions, transfer taxes and any other expenses directly related to the purchase of the securities, but excluding any purchased interest.
The excess of the par or face value of a fixed income security over the amount paid for the security, excluding purchased interest.
The excess of the amount paid for a fixed income security, excluding purchased interest, over its par or face value.
The gradual, systematic extinguishment of an amount of money over a period of time
Adjusted Cost Basis
The first cost of the securities adjusted for amortization of any premium or discount as of a given date.
Date of Purchase
The date the order was executed for the purchase of the securities (i.e., the "trade date" of the transaction as distinguished from the "settlement date").
The sale price of the securities, excluding purchased interest, less any brokerage fees, transfer taxes, or other expenses directly related to the sale.
II. General Guidelines
The University does not amortize premium or discount on any of the pooled investments. However, for non-pooled investments (examples: specific investments, life income & unitrusts), both premium and discount are amortized. Depending on the type of security, either the straight line method or yield to maturity method of amortization is used. The total life of the investment, for purposes of the amortization, shall commence on the date of purchase and continue until the maturity date of the particular security.
When fixed income securities are disposed of before their maturity date, the gain or loss to be recorded on the sale is the difference between the net proceeds from the sale and the adjusted cost basis of the securities at the time of sale.