figuring out monthly interest from tax exempt fund

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advicenow
Posts: 16
Joined: Wed Dec 12, 2018 3:50 pm

figuring out monthly interest from tax exempt fund

Post by advicenow »

In the past, I was always able to quickly figure out the approximate MONTHLY interest, assuming there was very very little change in interest rate. However, now my method doesn't always work even when interest rate has stayed the same over the course of the month . ANY suggestions? I multiply amount i have x 30 day yield and then divide by 12. I dont feel like doing a complicated calculation is i just need approximate.
jebmke
Posts: 11626
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: figuring out monthly interest from tax exempt fund

Post by jebmke »

I just checked 12 months of data on our holdings of Intermediate TE Fund. Very little fluctuation.
When you discover that you are riding a dead horse, the best strategy is to dismount.
RCL
Posts: 489
Joined: Sat Jul 05, 2014 2:48 am

Re: figuring out monthly interest from tax exempt fund

Post by RCL »

I ballpark my estimate by taking the number of shares I have * the rate per share.
Since 2017, the most the monthly dividend (on the same amount of shares),
has varied is about $49.44 from the highest monthly dividend to the lowest over that period.

Been pretty stable, but the current distribution yield is the lowest it has been since I've been
looking at it, so expecting smaller dividends in the future
MikeG62
Posts: 3228
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: figuring out monthly interest from tax exempt fund

Post by MikeG62 »

advicenow wrote: Tue Oct 13, 2020 4:34 pm In the past, I was always able to quickly figure out the approximate MONTHLY interest, assuming there was very very little change in interest rate. However, now my method doesn't always work even when interest rate has stayed the same over the course of the month . ANY suggestions? I multiply amount i have x 30 day yield and then divide by 12. I don't feel like doing a complicated calculation is i just need approximate.
You are looking at the 30-day SEC yield not the distribution yield. Those numbers have become quite disconnected over the last year or so.

Keep in mind that a portion of the distribution yield represents a return of principal (amortization of the bond premium). So while the distribution yield does represent the cash flow you are receiving that excess puts pressure on the NAV over time. This is hard to see because of the number of bonds in the portfolio and any even slight change in interest rates from day to day or week to week or month to month. However, that does not mean the excess of the distribution yield over the 30-day SEC yield is not a return of principal.
Real Knowledge Comes Only From Experience
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