Specify yield curve for determining net present value

In this step, you define the yield curves for determining net present value from the cash flow values of appropriation requests. You call the function manually for determining net present value, from master data maintenance for the appropriation request.

For each currency, you can define one yield curve, with one yield curve type for interest earned, and one yield curve type for interest charges.

Standard settings

SAP provides a yield curve as an example.

Recommendation

When determining the net present value of appropriation requests, it is often sufficient to work with a constant interest rate. In this case, you only need to enter the following for interest earned and interest charges: the term (life) and a reference interest rate. Both of these should be valid for a longer period of time, such as starting with January 1, 1900.

Activities

1. Enter a yield curve for the currency, with a yield curve type for interest charged (yield curve type 9990) and a yield curve type for interest earned (yield curve type 9991).
The yield curve types 9990 and 9991 are predefined in the system and cannot be changed.
2. For each yield curve, enter any number of terms (lives), as points for helping to generate the curve.
These terms, along with their assigned reference interest rates, determine the course of the interest curve. The system extrapolates the curve between the defined terms. After the last defined term, the system continues a constant calculation using the last reference interest rate (linear curve parallel to the time axis).
3. For each term, enter at least one reference interest rate.
You can define the reference interest rates with a valid-from date. This means you can make the curve time-dependent. If you do not want to make the curve time dependent, just enter a reference interest rate with a valid-from date in the distant past (such as January 1, 1900).