I’m surprised this is not in the notes...
MA is added to the risk free rate prescribed in the rules.
Conceptually, the MA can be thought of as the difference between the (implied) spread on the ‘bonds and other assets with similar cash flow characteristics’ less the fundamental spread (FS). The FS will vary, amongst other things, by credit rating.
Government bonds that are included in a firm’s MAP will contribute towards the calculated MA benefit as any other asset in the MAP.
Last edited: Aug 30, 2019