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State and Local Government Series ( SLGS ) Interest Calculations

State and Local Government Series ( SLGS ) Interest Calculations. Presented by: Alanna Kelly & Carrie Smith. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM. SLGS Interest Calculations. Certificates of Indebtedness Interest Calculation Early Redemption Calculation Notes & Bonds

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State and Local Government Series ( SLGS ) Interest Calculations

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  1. State and Local Government Series (SLGS) Interest Calculations Presented by: Alanna Kelly & Carrie Smith 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  2. SLGS Interest Calculations • Certificates of Indebtedness • Interest Calculation • Early Redemption Calculation • Notes & Bonds • Semi-Annual Interest Calculation • Short Interest Period Calculation • Long Interest Period Calculation • Early Redemption Calculation 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  3. Certificates of Indebtedness The SLGS Certificates of Indebtedness that are interest bearing are certificates with a maturity period of not less than thirty days and not more than one year. There are non-interest bearing Certificates of Indebtedness that have maturity period of not less than fifteen days and not more than one year. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  4. Certificates of Indebtedness • Certificate of Indebtedness Interest Calculation • (Annual Interest/Number of Days in the Annual Interest Period) X Number of Days Outstanding = Interest Payment Amount • Number of Days in the Annual Interest Period • You calculate this by using the number of days between the issue date and one year after the issue date. (For Example: 03/1/11 – 02/28/12, date ranges for 2012 Leap Year.) 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  5. Certificates of Indebtedness • Example: 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  6. Certificates of Indebtedness • (Annual Interest/Number of Days in the Annual Interest Period) X Number of Days Outstanding = Interest Payment Amount • Multiply the Principal by the Interest Rate to get the Annual Interest • $45,618,182 X .15% = $68,427.27 • Calculate the Number of Days in the Annual Interest Period • 4/17/2012 to 4/17/2013 = 365 days • Calculate the Number of Days Outstanding • 04/17/2012 to 12/01/2012 = 228 days • Divide the Annual Interest by the Number of Days in the Annual Interest Period and multiply the product by the Number of Days Outstanding. • ($68,427.27/365) X 228 = $42,743.61 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  7. Certificates of Indebtedness • An interest bearing SLGS Certificate of Indebtedness may be redeemed no earlier than twenty five days after issue date. • The early redemption amount will be computed based on the current market value. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  8. Certificates of Indebtedness • Borrowing Rate Calculation • The Current Borrowing Rate is calculated in the following way: • Find the term from Early Redemption Date to actual Maturity Date and the corresponding rate on the SLGS Rate Table for the Redemption Request Date. • Add one basis point to the corresponding SLGS Rate for the Current Borrowing Rate. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  9. Certificates of Indebtedness • Early Redemption Calculation • Redemption Value (RV) is calculated using the following formula: • RV = {[(Number of Days from Issue Date to Maturity/Number of Days in the Year Following the Issue date) X (Interest Rate X Early Redemption Amount) + Early Redemption Amount] / [1 + (Number of Days from Early Redemption Date to Maturity Date / Number of Days in the Year Following the Issue Date) X Current Borrowing Rate]} • – Accrued Interest 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  10. Certificates of Indebtedness • Premium or Discount Calculation for Early Redemption • If the Redemption Value < Early Redemption Amount then a discount is calculated as follows: • Discount = Early Redemption Amount – Redemption Value • If the Redemption Value > Early Redemption Amount then a premium is calculated as follows: • Premium = Redemption Value – Early Redemption Amount • If the Redemption Value is equal to the Early Redemption Amount then there is no premium or discount. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  11. Notes & Bonds • Notes • The SLGS Notes have a maturity period of not less than one year and one day, and not more than ten years. • Bonds • The SLGS Bonds have a maturity period of not less than ten years and one day, and not more than forty years. • Interest Payment Dates on Notes and Bonds • Notes and Bonds pay interest semi-annually. • The issuer specifies the first interest payment date. • The first interest payment date must be at least thirty days and less than or equal to one year from the date of issue. • The first interest payment date must also coincide with the maturity date. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  12. Notes & Bonds • Semi-Annual Interest Calculation • (Principal X Rate) / 2 = Semi-Annual Interest • Example: • Semi-Annual Interest Payments will be calculated as follows: • ($50,000 X 2.5%)/2 = $625 • Short Interest Period • When you choose a first interest payment date less than 6 months from your issue date. • Long Interest Period • When you choose a first interest payment date more than 6 months from your issue date. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  13. Notes & Bonds • Short Interest Period Calculation • (Semi-Annual Interest/Number of Days in the Semi-Annual Interest Period) X Number of Days Outstanding = First Interest Payment • Example: • Issue Date of 02/05/2013 • First Interest Payment Date of 04/01/2013 • Number of Days in the semi-annual interest period 10/01/2012 to 04/01/2013 = 182 days • Number of Days Outstanding from 02/05/2013 to 04/01/2013 = 55 days • ($12,184.03/182) X 55 = $3,681.99 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  14. Notes & Bonds • Long Interest Period Calculation • Semi-Annual Interest + (Semi-Annual Interest/Number of Days in the Partial Interest Period) X Number of Days Outstanding in the Partial Period = First Interest Payment • Example • Issue Date of 02/27/2013 • First Interest Payment Date of 09/01/2013 • Number of days in the partial interest period from 09/01/2012 to 03/01/2013 = 181 • Number of days outstanding in the partial period from 02/27/2013 to 03/01/2013 = 2 • $2,234.00 + ($2,234.00/181) X 2 = $2,258.69 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  15. Notes & Bonds • An interest bearing SLGSNote or Bond may be redeemed no earlier than thirty days after issue date. • The early redemption amount will be computed based on the current market value. • There are different parameters that decide what formula is used for this Calculation 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  16. Notes & Bonds • Example: • If the Interest Rate is greater than 0% and the Redemption Date is greater than or equal to the First Interest Payment Date then use the following formulas for Accrued Interest (AI) and Redemption Value (RV). 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  17. Notes & Bonds • Calculation for Accrued Interest on Early Redemption: • AI = [(Number of Days in the Semi-Annual Period Containing the Redemption Date – Number of Days from Early Redemption Date to Next Interest Payment Date)/Number of Days in the Semi-Annual Period Containing the Redemption Date]X (Annual Interest/2) 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  18. Notes & Bonds • Calculation for Component Vⁿ for Early Redemption: • Vⁿ = 1 / (1 + (Current Borrowing Rate/2))ⁿ • ⁿ = the number of remaining full semi-annual interest periods from early redemption date to maturity date except if early redemption date is on an interest payment date, ⁿ will be one less than the number of full semi-annual periods remaining to maturity date 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  19. Notes & Bonds • Calculation for Component an for Early Redemption: • an = (1- Vⁿ)/(Current Borrowing Rate/2) 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  20. Notes & Bonds • Calculation for Redemption Value on Early Redemption: • RV ={[((Annual Interest/2) + (Annual Interest/2) X an) + (Early Redemption Amount X Vⁿ)]/[ 1 + (Number of Days from Early Redemption Date to Next Interest Payment Date / Number of Days in Semi-Annual Period Containing the Redemption Date) X (Current Borrowing Rate / 2)]}- AI 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  21. Notes & Bonds • Premium or Discount Calculation for Early Redemption • If the Redemption Value < Early Redemption Amount then a discount is calculated as follows: • Discount = Early Redemption Amount – Redemption Value • If the Redemption Value > Early Redemption Amount then a premium is calculated as follows: • Premium = Redemption Value – Early Redemption Amount • If the Redemption Value is equal to the Early Redemption Amount then there is no premium or discount. 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  22. SLGS Interest Calculations • Certificates of Indebtedness • Interest Calculation • Early Redemption Calculation • Notes & Bonds • Semi-Annual Interest Calculation • Short Interest Period Calculation • Long Interest Period Calculation • Early Redemption Calculation 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

  23. SLGS Interest Calculations Questions? 2013 STATE AND LOCAL GOVERNMENT SERIES SECURITIES FORUM

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