§ 11731 Bond Interest Rate Limits

This law says the government can set interest rates on bonds, but they can't go over 12% per year unless there's a special rule that keeps the total interest under control.

Key Takeaways

•The government sets the interest rate on bonds.
•The interest rate usually can't go over 12% per year.
•If they charge more than 12% on some days, the average over time must still be 12% or less.

Example

The government sells bonds to build a new school.

They can charge up to 12% interest on these bonds. If they want to charge more than 12% on some days, they have to make sure the average interest over time doesn't go over 12%.

How to Calculate

Total interest over time ≤ 12% per annum

Figure out the total interest charged on the bond over a certain time.
Check if the average interest per year is 12% or less.
If the government wants to charge more than 12% on some days, make sure the average over the whole time is still 12% or less.

A bond is issued for 1 year with a $1000 value.

Result: The total interest charged over the year cannot be more than $120, even if some days have higher rates.

The department and the Treasurer shall determine the interest rate or rates on the bonds. The rate or rates may be fixed or variable and shall not exceed 12 percent per annum, except that the rate on any bond may, on any day, exceed 12 percent per annum if the interest borne by the issue of which the bond is a part from its date of issuance to, and including, that day does not exceed the total interest which would have been borne by the issue if all bonds of the issue had borne interest during that period at the rate of 12 percent per annum. (Amended by Stats. 1986, Ch. 719, Sec. 2. Effective September 15, 1986.)

This law says the government can set interest rates on bonds, but they can't go over 12% per year unless there's a special rule that keeps the total interest under control.

Key Takeaways

•The government sets the interest rate on bonds.
•The interest rate usually can't go over 12% per year.
•If they charge more than 12% on some days, the average over time must still be 12% or less.

Example

The government sells bonds to build a new school.

They can charge up to 12% interest on these bonds. If they want to charge more than 12% on some days, they have to make sure the average interest over time doesn't go over 12%.

How to Calculate

Total interest over time ≤ 12% per annum

Figure out the total interest charged on the bond over a certain time.
Check if the average interest per year is 12% or less.
If the government wants to charge more than 12% on some days, make sure the average over the whole time is still 12% or less.

A bond is issued for 1 year with a $1000 value.

Result: The total interest charged over the year cannot be more than $120, even if some days have higher rates.

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 11731 Bond Interest Rate Limits

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References