Sample Potential investments:
3 month CD @ 4.05%
5 month T-Bill @ 4.125%
8 month CD @ 4.225%
1 year T-Note @ 4.30%
2 year T-Note @ 4.60% Sample Current Overnight Rate: 4.00%

Should we purchase any, all or none of the investments
given the following expectations?

Rate Expectations:
3 months: 4.25%
6 months: 4.50%
12 months: 4.75%

Breakeven Calculation:

  1. Number of Days times expected rate for period plus number of days from
    rate change times new rate plus etc.etc.
  2. Previous total divided by total number of days.

3 months:
(90 x 4.00)/90 = ?
360/90 = 4.00 %

5 months:
((90 x 4.00) + (60 x 4.25))/150 = ?
(360 + 255)/150 = ?
615/120 = 4.10%

8 months:
((90 x 4.00) + (90 x 4.25) + (60 x 4.50))/240 = ?
(360 + 382.5 + 270)/240 = ?
1,012.5/240 = 4.219%

1 year:
((90 x 4.00) + (90 x 4.25) + (180 x 4.50)/360 = ?
(360 + 382.5 + 810)/360 = ?
1,552.5/360 = 4.3125%

2 years:
(1,552.5 + (360 x 4.75))/720 = ?
(1,552.5 + 1,710)/720 = ?
3,262.5/720 = 4.53125%

If you have any questions or comments for our Portfolio Managers,
please call us at (800) 346-7414.

  
   

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