31 CFR Appendix A to Part 344 - Appendix A to Part 344—Early Redemption Market Charge Formulas and Examples for Subscriptions From December 28, 1976, Through October 27, 1996

(a) The amount of the market charge for bonds and notes subscribed for before October 28, 1996 can be determined by the following formula:

(b) The application of this formula can be illustrated by the following example:

(1) Assume that a $600,000 note is issued on July 1, 1985, to mature on July 1, 1995. Interest is payable at a rate of 8% on January 1 and July 1.

(2) Assume that the note is redeemed on February 1, 1989, and that the current borrowing rate for Treasury at that time for the remaining period of 6 years and 150 days is 11%.

(3) The increased annual borrowing cost is $18,000. ($600,000)x(11%-8%)

(4) The market charge is computed as follows:

$\begin{array}{c}M=\frac{\left(\$\mathrm{18,000}/2\right)\times \left(150/181\right)+{\left(\$\mathrm{18,000}/2\right)}_{a_{n^{\neg }}}}{1+\left(150/181\right)\left(.11/2\right)}\\ \text{(Equation 4)}\\ \\ M=\frac{\left(\$\mathrm{7,458.56}\right)+{\left(\$\mathrm{9,000}\right)}_{a_{n^{\neg }}}}{1.045580111}\\ \text{(Equation 5)}\\ \\ M=\frac{\left(\$\mathrm{7,458.56}\right)+\left(\$\mathrm{9,000}\right)\times \lfloor \frac{1-\frac{1}{{\left(1+.11/2\right)}^{12}}}{\left(.11/2\right)}\rfloor }{1.045580111}\\ \text{(Equation 6)}\\ \\ M=\frac{\left(\$\mathrm{7,458.56}\right)+\left(\$\mathrm{9,000}\right)\left(8.618517849\right)}{1.045580111}\\ \text{(Equation 7)}\\ \\ M=\frac{\left(\$\mathrm{7,458.56}\right)+\left(\$\mathrm{77,566.66}\right)}{1.045580111}\\ \text{(Equation 8)}\end{array}$

$\begin{array}{c}M=\$\mathrm{81,318.71}\\ \text{(Equation 9)}\end{array}$

(c) The amount of the market charge for certificates of indebtedness subscribed for before October 28, 1996 can be determined by the following formula:

(d) The application of this formula can be illustrated by the following example:

(1) Assume that a $50,000 certificate of indebtedness is issued on March 1, 1987, to mature on November 1, 1987. Interest is payable at a rate of 10%.

(2) Assume that the certificate of indebtedness is redeemed on July 1, 1987, and that the current borrowing cost to Treasury for the 123-day period from July 1, 1987, to November 1, 1987, is 11.8%.

(3) The increased annual borrowing cost is $900. ($50,000) × (11.8%−10%)

(4) The market charge is computed as follows:

$\begin{array}{c}M=\frac{\$900\left(\frac{123}{365}\right)}{1+\left(\frac{123}{365}\right)\left(.118\right)}=\\ \text{(Equation 11)}\\ \frac{\$303.29}{1.039764384}=\\ \text{(Equation 12)}\\ \$291.69\\ \text{(Equation 13)}\end{array}$