31 CFR Appendix B to Part 344, Formula for Determining Redemption Value for Securities Subscribed for and Early-Redeemed On or After October 28, 1996

prev | next
Appendix B to Part 344 - Formula for Determining Redemption Value for Securities Subscribed for and Early-Redeemed On or After October 28, 1996

(a) This formula results in a premium or discount to the issuer depending on whether the current Treasury borrowing rate at the time of early redemption is lower or higher than the stated interest rate of the early-redeemed SLGS security. The total redemption value for bonds and notes can be determined by the following two steps. First, calculate accrued interest payable in accordance with § 344.6(d)(1) using the following formula:

Second, calculate the redemption value per § 344.6(d)(2) using the following formula:

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

(1) The first example is for a redemption at a premium.

(i) Assume that an \$800,000 2-year note is issued on December 10, 1996, to mature on December 10, 1998. Interest is payable at a rate of 7% on June 10 and December 10.

(ii) Assume that the note is redeemed on October 21, 1997, and that the current borrowing rate for Treasury at that time for the remaining period of 1 year and 50 days is 6.25%.

(iii) The redemption value is computed as follows. First, the accrued interest payable is calculated as:

Then, the redemption value is calculated as:

(2) The second example is for a redemption at a discount and it uses the same assumptions as the first example, except the current Treasury borrowing cost is assumed to be 8.00%:

(i) Assume that an \$800,000 2-year note is issued on December 10, 1996, to mature on December 10, 1998. Interest is payable at a rate of 7% on June 10 and December 10.

(ii) Assume that the note is redeemed on October 21, 1997, and that the current borrowing rate for Treasury at that time for the remaining period of 1 year and 50 days is 8.00%.

(iii) The redemption value is computed as follows.

First, the accrued interest payable is calculated as:

Then, the redemption value is calculated as:

(c) The total redemption value for certificates of indebtedness can be determined by the following two steps. First, calculate accrued interest payable in accordance with § 344.6(d)(1) using the following formula:

Second, calculate the redemption value per § 344.6(d)(2) using the following equation:

(d) The application of this formula can be illustrated by the following examples.

(1) First, for a redemption at a premium:

(i) Assume that a \$300,000 security is issued on December 5, 1996, to mature in 151 days on May 5, 1997. Interest at a rate of 5% is payable at maturity.

(ii) Assume that the security is redeemed on April 9, 1997, and that the current borrowing rate for Treasury at that time for the remaining period of 26 days is 4.00%.

(iii) The redemption value is computed as follows.

First, the accrued interest payable is calculated as:

Then, the redemption value is calculated as:

(2) Secondly, for a redemption at a discount:

(i) Assume that a \$300,000 security is issued on December 5, 1996, to mature in 151 days on May 5, 1997. Interest at a rate of 5% is payable at maturity.

(ii) Assume that the security is redeemed on April 9, 1997, and that the current borrowing rate for Treasury at that time for the remaining period of 26 days is 6.25%.

(iii) The redemption value is computed as follows.

First, the accrued interest payable is calculated as:

Then, the redemption value is calculated as:

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.

United States Code
U.S. Code: Title 26 - INTERNAL REVENUE CODE
U.S. Code: Title 31 - MONEY AND FINANCE

Title 31 published on 13-Sep-2018 03:45

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 31 CFR Part 344 after this date.

• 2012-06-07; vol. 77 # 110 - Thursday, June 7, 2012
1. 77 FR 33634 - U.S. Treasury Securities—State and Local Government Series
GPO FDSys XML | Text
DEPARTMENT OF THE TREASURY, Fiscal Service
Final rule.
This final rule is effective June 7, 2012.
31 CFR Part 344