§ 359.19. How is interest calculated?
172 words·~1 min read·
/us/cfr/t31/s§ 359.19·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
We base all calculations of interest on a \$25 unit. We use the value of this unit to determine the value of bonds in higher denominations. The effect of rounding off the value of the \$25 unit increases at higher denominations. This can work to your slight advantage or disadvantage, depending on whether we round the value up or down. 3 3 For example: A composite rate of 2.57% will result in a newly purchased \$25 unit increasing in value after six months to \$25.32, when rounded to the nearest cent.
Thus, a \$5,000 bond purchased at the same time as the \$25 unit will be worth \$5,064 after six months (\[\$5,000 divided by \$25\] × \$25.32 = \$5,064.) In contrast, if it applied directly to a \$5,000 bond, the rate would render a value of \$5,064.25 after six months, a difference of 25 cents. (This example does not include any discussion of the three-month interest penalty that applies if you redeem a bond less than five years after its issue date.)