New Zealand Gazette – 2004 – No. 68

Page 1612

✨ Financial Tables and Calculations

1612

NEW ZEALAND GAZETTE, No. 68

10 JUNE 2004

For the purpose of illustration, the spot rates and the forward rates at the initial drawn down date out to the relevant dates for GBP/NZD are presented below. The forward rates were estimated based on the principle of covered interest parity using the interest rates in the UK (UK,I), the domestic interest rates (NZ,I) and the spot rate at the initial drawn down date. In this simple example, the (UK,I) and the (NZ,I) were assumed to be 10% per annum and 8% per annum, respectively, and they remain constant throughout the entire period (assuming a horizontal yield curve so that a 6-month bond and a 10-year bond have the same rate).

Date	Actual Spot	CIP Fwd (0,t)	Expected UK,I	Expected NZ,I
1-Oct-04	0.3300	0.3300	0.05	0.04
1-Feb-05	0.3345	0.3332	0.05	0.04
1-Aug-05	0.3340	0.3364	0.05	0.04
1-Feb-06	0.3310	0.3396	0.05	0.04
1-Aug-06	0.3184	0.3429	0.05	0.04
1-Feb-07	0.3046	0.3462	0.05	0.04
1-Aug-07	0.3387	0.3495	0.05	0.04
1-Feb-08	0.3024	0.3529	0.05	0.04
1-Aug-08	0.2829	0.3563	0.05	0.04
1-Feb-09	0.3503	0.3597	0.05	0.04
1-Aug-09	0.3736	0.3631	0.05	0.04
1-Feb-10	0.3773	0.3666	0.05	0.04
1-Aug-10	0.3874	0.3702	0.05	0.04
1-Feb-11	0.4034	0.3737	0.05	0.04
1-Aug-11	0.4225	0.3773	0.05	0.04
1-Feb-12	0.4435	0.3809	0.05	0.04
1-Aug-12	0.4414	0.3846	0.05	0.04
1-Feb-13	0.4296	0.3883	0.05	0.04
1-Aug-13	0.3955	0.3920	0.05	0.04
1-Feb-14	0.3953	0.3958	0.05	0.04
1-Aug-14	0.3953	0.3996	0.05	0.04
1-Oct-14	0.3953	0.4034	0.05	0.04

For taxation purposes, each of these tranches is treated as a separate financial arrangement. The following example illustrates the way gross income or expenditure with respect to the GBP tranche is calculated at the initial drawn down date and the subsequent balance dates.

At the initial drawn down date – 1 October 2004

At the initial drawn down date, the expected payments in GBP and NZD over the 10-year period are as follows:

Date	(a) GBP Cash	(b) Expected Cash NZD	(c) Expected Expenditure
1-Oct-04	36,000,000	109,090,909
1-Feb-05	−1,320,000	−3,961,905	4,646,006
1-Aug-05	−1,980,000	−5,886,259	4,675,141
1-Feb-06	−1,980,000	−5,830,199	4,623,561
1-Aug-06	−1,980,000	−5,774,673	4,572,173
1-Feb-07	−1,980,000	−5,719,676	4,520,960
1-Aug-07	−1,980,000	−5,665,203	4,469,909
1-Feb-08	−1,980,000	−5,611,249	4,419,003
1-Aug-08	−1,980,000	−5,557,808	4,368,227
1-Feb-09	−1,980,000	−5,504,877	4,317,565
1-Aug-09	−1,980,000	−5,452,450	4,266,999
1-Feb-10	−1,980,000	−5,400,521	4,216,513
1-Aug-10	−1,980,000	−5,349,088	4,166,088
1-Feb-11	−1,980,000	−5,298,144	4,115,706
1-Aug-11	−1,980,000	−5,247,686	4,065,347
1-Feb-12	−1,980,000	−5,197,708	4,014,993
1-Aug-12	−1,980,000	−5,148,206	3,964,624
1-Feb-13	−1,980,000	−5,099,175	3,914,217
1-Aug-13	−1,980,000	−5,050,612	3,863,751
1-Feb-14	−1,980,000	−5,002,511	3,813,205
1-Aug-14	−1,980,000	−4,954,868	3,762,554
1-Oct-14	−36,660,000	−90,866,409	3,711,775
Total	−39,600,000	−88,488,316	88,488,316
6-Month YTM	5%	4%