Mutual Fund Breakpoint Refund Interest Calculator

Table of Contents

How is the Annual Percentage Rate (APR) calculated?
How is the Average APR calculated?
Why did the Breakpoint Calculator computation change on 1/10/2005?
What are the values that should be entered into each field?
How many calculations can I perform at one time?
What formula does the Calculator use?
How is the time determined in the simple interest formula?
I notice that there are no rates for the current months, what do you use?
Why can't I input a refund date beyond the end of next month?
What happens if the refund amount is greater than two decimal places?
Can you explain in detail how the calculation is performed?
Who may I contact if I have questions regarding the Mutual Fund Breakpoint Refund Interest Calculator?

How is the Annual Percentage Rate (APR) calculated?

As of January 10, 2005, the APR is determined in the following manner:
  • The APR is the greater of 2.5% or an average APR based on monthly average dealer rates published by the Federal Reserve on negotiable 6-month CDs nationally traded in the secondary market.
Note: Because the time is calculated in days, the APR is divided by the number of days in the year (365) in the simple interest formula. No adjustment is made for leap years.

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How is the Average APR calculated?

The Average APR is calculated by adding the APRs for each month between and inclusive of the transaction date and the refund date. The amount is then divided by the number of months between the transaction date and refund date, with the result being calculated out to three decimal places.

These monthly average APRs are available from the Federal Reserve at: http://www.federalreserve.gov/releases/h15/data/Monthly/H15_CD_M6.txt

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Why did the Breakpoint Calculator computation change on 1/10/2005?

The Breakpoint Calculator computation was revised on January 10, 2005 to reflect increasing interest rates. This change has been made to ensure that investors receive the most appropriate refund possible.

For more information about interest rates used by the Breakpoint Calculator, please refer to "How is the Annual Percentage Rate (APR) calculated?" above.

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What are the values that should be entered into each field?

The fields that a user can enter are the following:
  • Overcharge Amount—The difference between the fee that the investor did pay on the transaction date and the amount that they should have paid. This field is expecting a dollar value entry.
  • Transaction Date—The date on which the mutual fund purchase took place.
  • Refund Date—The date that the firm will refund the investor.
  • Identifier—An optional field that allows the user to tie a particular calculation with a certain customer. This field will accept numbers, letters and symbols as entries.

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How many calculations can I perform at one time?

Ten calculations can be completed simultaneously. However, the tool can be used repeatedly to perform as many calculations as needed.

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What formula does the Calculator use?

The Mutual Fund Breakpoint Refund Interest Rate Calculator determines the appropriate Annual Percentage Rate (APR) for the timeframe of the transaction, and uses a simple interest calculation to determine the amount that should be refunded to the investor.

Refund = Dollars owed + (Dollars owed * APR * Time)

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How is time determined in the simple interest formula?

Time is determined by counting the number of days between the refund date and the transaction date.

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I notice that there are no rates for the current months, what do you use?

In the event that an interest rate is not available from the Federal Reserve (i.e. current calendar months), the calculator uses the interest rate from the most recent prior month.

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Why can't I input a refund date beyond the end of next month?

We cannot predict how interest rates may fluctuate in the future, and therefore we are unable to extrapolate an accurate total refund amount.

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What happens if the refund amount is greater than two decimal places?

If the calculation result returns a number that has more than two decimal points precision, the number is truncated. For example, if the result were calculated to be $1002.338, the value displayed would be $1002.33.

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Can you explain in detail how the calculation is performed?


Here is a sample calculation based on the rules listed above:

Parameters: Transaction date = 11/23/1998, Dollars owed = $500.00, Refund date = 8/11/2003.

Calculation Steps (for transactions before January 1, 2001)
  1. Average monthly interest rate = .03954—this is the average monthly interest rate from November, 1998 through August, 2003 inclusive, divided by 100, and rounded to a decimal precision of 5 places (x.xxxxx).
  2. Average daily interest rate = .000108328—this is the average monthly interest rate (.03954), divided by 365, and truncated to a decimal precision of 9 places (x.xxxxxxxxx).
  3. Refund Amount = $593.27—this is the average daily interest rate (.000108328) multiplied by dollars owed (500), multiplied by the number of days between the transaction date and refund date (1722), added to the dollars owed (500), and truncated to a decimal precision of 2 places (xxx.xx).

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Who may I contact if I have questions regarding the Mutual Fund Breakpoint Refund Interest Calculator?

For questions or comments regarding the Mutual Fund Breakpoint Refund Interest Calculator, please use this feedback form. For all other inquiries related to mutual fund breakpoint refunds and regulations, please refer to the contact information provided in the Notice To Members.

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