Appendix A to Part 344-
A. The amount of the market charge for bonds and notes subscribed for before
October 28, 1996 can be determined by the following formula:
[See Mun-Ease documentation]
where:
M=Market charge
b=increased annual borrowing cost (i.e., principal multiplied by the
excess current borrowing rate for the period from redemption to
original maturity of note or bond over the rate for the security)
r=number of days from redemption date to next interest payment date
s=number of days in current semi-annual period
i=Treasury borrowing rate over the remaining term to maturity, based on
semi-annual interest payments and expressed in decimals.
n=number of remaining full semi-annual periods from the redemption date
to the original maturity date, except that if the redemption date is on
an interest payment date, n will be one less than the number of full
semi-annual periods remaining to maturity.
v<SUP>n=1/(1 + i/2)<SUP>n=present value of 1 due at the end of n
periods (Equation 2)
a<INF>a = (1-v<SUP>n)/(i/2) = v + v<SUP>2 + v<SUP>3 + ... + v<SUP>n =
present value of 1 per period for n periods (Equation 3)
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:
[See Mun-Ease documentation]
C. The amount of the market charge for certificates subscribed for before
October 28, 1996 can be determined through use of the following formula:
[See Mun-Ease documentation]
where
M=market charge
b=increased borrowing cost for full period
r=number of days from redemption date to original maturity date
s=number of days in current annual period (365 or 366)
i=current borrowing rate expressed in decimals (discount factor)
D. The application of this formula can be illustrated by the
following example:
(1) Assume that a $50,000 certificate 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 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) x
(11.8%-10%)
(4) The market charge is computed as follows:
[See Mun-Ease documentation]