A Fixed-Rate Token can rise to the same face value and still produce very different APYs.
Consider a purely hypothetical TermMax FT that redeems for 1 debt token in 60 days. If it costs 0.96 today, the holding-period return is not “4% APY.” It is:
(1 / 0.96 − 1) = 4.17% over 60 days.
Using the simple annualization method in the TermMax documentation:
4.17% × 365 / 60 ≈ 25.35% annualized.
The same 0.96 purchase price with only 30 days remaining would show a much higher annualized figure, even though the maturity payment is still 1.
That is why I would never compare two FT opportunities using APY alone. I would record four inputs: purchase price, redemption value, days remaining and total execution costs. Slippage or an early sale can make the realized result different from the hold-to-maturity calculation.
My practical rule: first calculate the cash gain for the actual term; only then annualize it.
Sources checked: TermMax Docs — Token; Fixed Rate Tokenization.
@TermMax #TermMax
Consider a purely hypothetical TermMax FT that redeems for 1 debt token in 60 days. If it costs 0.96 today, the holding-period return is not “4% APY.” It is:
(1 / 0.96 − 1) = 4.17% over 60 days.
Using the simple annualization method in the TermMax documentation:
4.17% × 365 / 60 ≈ 25.35% annualized.
The same 0.96 purchase price with only 30 days remaining would show a much higher annualized figure, even though the maturity payment is still 1.
That is why I would never compare two FT opportunities using APY alone. I would record four inputs: purchase price, redemption value, days remaining and total execution costs. Slippage or an early sale can make the realized result different from the hold-to-maturity calculation.
My practical rule: first calculate the cash gain for the actual term; only then annualize it.
Sources checked: TermMax Docs — Token; Fixed Rate Tokenization.
@TermMax #TermMax