[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1786.153]
[Page 1109-1110]
TITLE 7--AGRICULTURE
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1786--PREPAYMENT OF RUS GUARANTEED AND INSURED LOANS TO ELECTRIC AND TELEPHONE BORROWERS--Table of Contents
Subpart F--Discounted Prepayments on RUS Electric Loans
Sec. 1786.153 Discounted present value.
(a) The discounted present value shall be calculated by summing the
present values of all remaining payments on all Qualified Notes to be
prepaid according to the following formula and adjusted as provided in
paragraph (b) of this section if tax exempt financing is used.
[GRAPHIC] [TIFF OMITTED] TR22MR94.016
Where:
The Greek letter, Sigma ([Sigma]) means the sum of the following terms.
The Greek letter, Pi ([Pi]) means the product of the following terms.
Pk=Total payment, including interest due on the
Kth payment date following the prepayment date.
n=Total number of remaining payment dates to final maturity.
D1i=Number of days in the ith payment period that
are in a non-leap year (365-day year).
D2i=Number of days in the ith payment period that
are in a leap year (366-day year).
I=The discount rate applied to each transaction ascertained by using
data specified in the ``Federal Reserve Statistical Release'' (H.15
(519)), which is published each Monday. The availability of this Release
will be announced when the information is available by telephone on
(202) 452-3206. See adjustment for tax exempt refinancing at paragraph
(b) of this section. The specific discount rate will be based on the
discount rate(s) specified in the ``Treasury Constant Maturities''
section of this publication 8 business days prior to the closing and
will be interpolated from that information as follows:
------------------------------------------------------------------------
Remaining final maturity of RUS loan:
-------------------------------------------------
At least But less
-------------------------------------- than Treasury constant
----------- maturities
years
years
------------------------------------------------------------------------
0.................................... 2 1-year.
2.................................... 3 2-year.
3.................................... 4 3-year.
4.................................... 5 (1)
5.................................... 6 5-year.
6.................................... 7 (2)
7.................................... 8 7-year.
8.................................... 9 (3)
9.................................... 10 (3)
10................................... 11 10-year.
11................................... 20 (4)
20................................... 21 20-year.
21................................... 30 (5)
30................................... 36 30-year.
------------------------------------------------------------------------
Notes: 1 The arithmetic mean between the 3-year. and 5-year. Treasury
Constant Maturities; i.e., if 3-year. rate is 3.00% and the 5-year.
rate is 4.00% then the rate used would be 3.5%.
2 The arithmetic mean between the 5-year and 7-year Treasury Constant
Maturities computed as above.
3 A straight line interpolated rate between the 7-year rate and the 10-
year rate. (See formula below)
4 A straight line interpolated rate between the 10-year note and the 20-
year Bond rate. (See formula below)
[[Page 1110]]
5 A straight line interpolated rate between the 20-year bond and the 30-
year bond using the following formula:
[GRAPHIC] [TIFF OMITTED] TR22MR94.017
Where:
I=The discount rate interpolated from the cost of money to the Treasury.
A=The Treasury interest rate for the most recently published maturity
(in years) that is the shortest Treasury term (in years) which is
greater than the borrower's remaining term (in years) to final maturity;
i.e., (if the note to be prepaid has a final maturity of more than 10
years then this rate is the 20-year Treasury rate)
B=The Treasury interest rate for the most recently published maturity
(in years) that is the longest Treasury term (in years) which is less
than the borrower's remaining term (in years) to final maturity; i.e.,
(if the note to be prepaid has a final maturity of more than 10 years
but less than 20 years then this term is the 10-year Treasury rate)
C=The remaining number of full years to the final maturity of the
borrower's note. Drop all fractions of a year and use the remaining full
years.
E=The published Treasury term (in years) to maturity which is the
longest term to maturity for the published term that is less than the
remaining term (in years) to final maturity of the borrower's note;
i.e., (if the note to be prepaid has remaining years to maturity between
11 and 20 years then this term would be 10 or if the note to be prepaid
has remaining years to maturity between 21 years and 30 years then this
term would be 20).
F=The published Treasury term (in years) to maturity which is the
shortest term to maturity for the published term that is greater than
the remaining term (in years) to maturity of the borrower's note; i.e.,
(if the note to be prepaid has remaining years to maturity between 11
and 20 years then this term would be 20 or if the remaining years to
maturity is between 21 and 30 years then this term would be 30).
Note: The percentage terms used in the above formula will be
truncated to two decimal places. For the purpose of the terms A, B, E,
and F above the published Treasury rate and term shall mean the Treasury
Constant Maturities from the Federal Reserve Statistical Release for 7
years, 10 years, 20 years, and 30 years.
(b)(1) In the event that the borrower prepays a loan under paragraph
(a) of this section using, directly or indirectly, tax exempt financing,
the discount shall be adjusted to ensure that the borrower receives a
benefit that is no greater than the benefit the borrower would receive
if the borrower used financing that was not tax exempt. The borrower
shall certify in writing whether the financing will be tax exempt.
(2) The discount rate established in paragraph (a) of this section
shall be adjusted for a tax exempt financing by substituting for the
``I'' term in the discount rate formula, a discount rate equal to the
interest rate(s) published pursuant to 7 CFR 1714.5, determination of
interest rates on municipal rate loans. This is the interest rate
established for the new RUS loan program which is based on municipal
interest rates for issues of comparable maturity. No interpolation or
average will be used. If a note is to be prepaid under this subpart and
is subject to this tax exempt adjustment, the discount rate will be
determined from the published table in the Federal Register.For example,
if the note to be discounted matures in the year 1999 then the discount
rate will be the interest rate for the year 1999. RUS will publish a
schedule of interest rates for municipal rate loans in the Federal
Register at the beginning of each calendar quarter. The published rates
in effect eight business days prior to closing will be used for the
discount rates. All notes to be prepaid that have remaining years to
maturity of more than 20 years will be discounted at the interest rate
in effect for new RUS municipal rate loans of comparable maturity at the
time of closing.