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

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(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:

(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: