FDM.3:5.2 - Constructing a partial payment and a shifted due date
The question is what B must arrange to pay at the next due date after a 1,000-unit early receipt by lender L. Both parties use USD. The case supplies an effective agreement, valid party identities and the following complete terms for the events considered; their legal effect is a premise of the example.
| Supplied term | Modeling consequence to derive |
|---|---|
| L advances 3,650 to B on 2 April 2026. | The advance creates principal of 3,650 when it occurs; it is a cash inflow for B and outflow for L. |
| Ordinary interest is simple, 10% annually on unpaid principal, actual days divided by 365. An interval includes its first date and excludes its last. Interest itself bears no interest. | Split an interval when principal changes. Carry accrued interest separately until paid; no capitalization. |
| Remaining principal and ordinary interest are payable on 2 May. A nonbusiness payment date moves to the following business day without extending ordinary interest accrual. For this example only, every Monday–Friday is a business day and there are no holidays. | The accrual endpoint is 2 May; the payment due date is 4 May. This is a stipulated calendar, not a jurisdiction’s calendar. |
| B may make an early payment on a business day after valid notice received at least one business day earlier. An effective receipt first pays all interest accrued to that date, rounded to cents, then principal. There is no early-payment fee. | A notice enables the action but changes no amount by itself. Accrue first, allocate the receipt, then use the reduced principal. |
| Payment takes effect only upon irrevocable credit to L’s designated account. All effective dates here are treated as the beginning of that date. | A submitted instruction alone cannot establish the receipt or the principal reduction. |
| No other payment, fee, rate change or capitalization affects this calculation. Round interest to the nearest cent, halves upward, when it is paid; final interest is rounded once at maturity payment. | The example’s arithmetic needs no guessed charges or daily rounding. Questions about later default charges require their separate terms. |
The history establishes the 2 April advance, valid notice on 16 April and irrevocable credit of 1,000 on 17 April. For these confirmed transfers, both parties’ corresponding cash movements occurred on the stated dates. The account is prepared just after the 17 April receipt. The future path assumes full payment on 4 May, with B’s debit and L’s irrevocable credit both on that date.
The decisive interpretation occurs before subtraction. The 1,000 is a total receipt, not a principal-only reduction. Fifteen days of interest on 3,650 at 10%/365 equal 15.00. The receipt therefore pays 15.00 of interest and 985.00 of principal. Principal becomes 2,665.00; accrued unpaid interest becomes zero.
| Event or boundary | Cash for B | Derived state or required payment |
|---|---|---|
| Confirmed advance, 2 April | +3,650.00 | Principal 3,650.00; interest starts accruing. |
| Accrual to 17 April, before receipt allocation | 0 | Interest 3,650 × 0.10 × 15 / 365 = 15.00. |
| Confirmed receipt, 17 April | −1,000.00 | Pay interest 15.00 and principal 985.00; principal 2,665.00, unpaid interest zero. |
| Ordinary accrual endpoint, 2 May | 0 | Another 15 days produce unrounded interest 10.95205479… . |
| Payment due, 4 May | −2,675.95 if fully performed | Principal 2,665.00 plus rounded interest 10.95. Actual discharge still depends on the receipt condition. |
The due amount is a view of the principal and interest being demanded, not a third balance to add to them. Signs reverse for L’s account of the same transfers. Neither those signs nor the matching bank amounts establish the institutional allocation without the terms.
Accrue the first interval on the principal that was outstanding during it. The next interval uses 2,665, and the payment moves to Monday while ordinary accrual still stops on Saturday. A model that subtracts the entire 1,000 from principal has omitted allocation; a model that uses 2,665 for the first interval has rewritten the past.
Now change one term: ordinary interest runs to the adjusted payment date. The first receipt and its allocation remain established. Only the later accrual interval changes from 15 to 17 days. Its interest becomes 12.41232877… and the due amount becomes 2,677.41. B’s provision of 2,676 would cover the original obligation and fall short by 1.41 under the changed term. Reuse the first interval instead of rebuilding it. If the operative text does not settle which accrual rule applies, return these conditional results and the precise interpretation question.
Change the evidence instead of the term: the 17 April record proves only an instruction and its effect is unknown. Keep the confirmed advance. Ask the payment provider whether and when the same attempt produced the required credit. The 2,665 principal is then conditional on credit on 17 April; it is not an established actual balance. A proved failure with no other receipt leaves principal 3,650 and ordinary interest 30.00 through 2 May, giving 3,680.00 due on 4 May. A credit on a different date requires splitting at that date and recalculating. Missing evidence does not establish any one of these paths.
If the confirmed 1,000 instead belongs to a refundable collateral arrangement, recover that arrangement’s effect under FDM.4. A transfer with the same amount and date can create a collateral position while leaving the loan principal unchanged. FDM.4:5.2 develops this distinction between refundable collateral and repayment.
For the model’s use, FIN.2 consumes the qualified amount and due date together with B’s usable funds; FIN.10 can compare a different financing arrangement. FDM.5 asks whether the treasury service used the model to arrange a sufficient payment and what effect followed. The next action and any claimed benefit depend on that receiving use.