I use the phrase because preferred shares can last forever; but taking account of this infinite length of time would require too many special cases in the software and take up too much computation time for very limited benefits – if any! I made the point a few times in the appendix to the April, 2011, PrefLetter that if you calculate more decimal places than are justified by the accuracy of your data, then you are really just wasting time fooling yourself.

So, instead of performing special calculations to account for the preferred share lasting forever, the software instead defines “forever” as “thirty years from the date of calculation”.

Thus, for example, the recommended BAM.PR.N issue is denoted with a “LimitMaturity”, since the fact that it is trading at a discount to par with no means by which an investor can force the company to redeem them means that it is prudent to assume they will last forever.

In order to analyze these shares in a manner consistent with all the other issues, the software then pretends, on the calculation date of 2011-4-8, that the issue will mature on 2041-4-8 at a price equal to its current price of 21.10. This assists in the computation of Modified Duration and PseudoConvexity.

In turn, this ensures that the calculations, and the valuations, are consistent with the calculations and valuations for those issues that really do mature (such as BNA.PR.C, for instance) and the increase in comparability is worth the slight loss of accuracy.