4.8.3 Yield

The yield on a bond issue is the discount rate or interest rate that allows all of the payments of principal and interest on the bonds (net of payments or receipts from certain interest rate hedging transactions such as swap agreements), plus any payments for credit enhancement (such as letter of credit fees or bond insurance premiums), to equal the aggregate issue price of the bonds, on a present value basis and as of the date the bonds are issued. The issue price of bonds is measured on a maturity by maturity basis (or by CUSIP79 number if there are bonds of a split maturity) and is generally the first price at which at least 10% of each maturity (or CUSIP number) of bonds are sold to persons who are not underwriters. An underwriter’s discount or fee does not affect the issue price of the bonds and, therefore, does not affect the calculation of yield on the bonds. In other words, although from the issuer’s perspective the payment of an underwriter’s discount increases borrowing costs, it does not increase the yield on the bonds.