Review of Rural Telephone Bank 1995 Loan Interest Rate Calculation

GAO is required to review each year the interest rate charged to borrowers, referred to as the cost of money rate, as set by the Rural Telephone Bank for the preceding fiscal year. The Rural Telephone Bank now calculates the following two rates: (1) the interest rate used for advances made during fiscal year 1995 on loans approved before fiscal year 1992 (referred to as loans from the liquidating account); and (2) the interest rate used for advances made during fiscal year 1995 on loans approved during or after fiscal year 1992 (referred to as loans from the financing account). The Rural Telephone Bank's fiscal year 1995 cost of money rates were pegged at 6.04 percent and 6.88 percent for advances from the liquidating account and the financing account, respectively. GAO found these rate determinations to be in accordance with the law.

GAO found that: (1) RTB established its FY 1995 cost of money rates at 6.04 percent for liquidating account advances and 6.88 percent for financing account advances; and (2) the interest rate determinations were accurate and consistent with applicable laws and regulations.