Sec. 1204.005. COMPUTATION OF NET EFFECTIVE INTEREST RATE. (a) The net effective interest rate of an issue or series of public securities is computed by dividing the net interest cost of the issue or series by the aggregate total number of public security years of all public securities that comprise the issue or series and expressing the result as a rate of interest in percent per year. (b) In computing the net effective interest rate of an issue or series of public securities that includes one or more public securities on which interest accruing before the maturity of the public security is compounded, the public security years with reference to each separate compounding public security are increased by an amount obtained by dividing the amount of interest that is periodically compounded by 100 and multiplying the resulting quotient by the number of years from the date on which interest begins to accrue on the amount that is being compounded to: (1) the scheduled date for payment of the amount that is being compounded; or (2) with respect to a floating rate public security, the date interest on the public security is next computed, if that date is earlier than the scheduled date for payment of the amount that is being compounded. (c) For purposes of this chapter, interest compounded under Subsection (b) is considered as principal.
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