Hi, I’m trying to enhance the PP manual. Regarding the processing of bond purchases, I’m having some difficulties; see Managing bonds - Portfolio Performance Manual. The options I describe in the text are from the German-language forum (Verbuchung von Anleihen) but I’m not confident they are correct, more specifically:
(1) Why does option 1 result in an incorrect performance calculation?
(2) For options 2 and 3, the effective interest payment is reduced by the portion already earned at the time of purchase. Does this not create a distorted picture of the interest evolution?
(3) Is there a specific advantage to choosing option 2 or 3?
Feedback will be greatly appreciated.