Example of Callable Step-Up Federally Insured Certificate of Deposit 

"XYZ Bank" Callable Step-Up Federally Insured Deposit Hypothetical Offering: An Illustration

Under "Coupons" in the example above, you'll see a schedule of coupon rates that correspond to each year of the certificates of deposit issue.

The "XYZ Bank" callable step-up Federally Insured certificates of deposit in this example are not callable for one year.

This means that the issuer has agreed to pay 2.50% of principal to owners for the first year of the investment, after which time the issue becomes callable at par on the coupon payment dates (at the option of the issuer - "XYZ Bank").

If the Federally Insured Deposits or Federally Insured certificates of deposit are not called by "XYZ Bank" on August 6, 2004 (the first call date), the coupon rate will "step up" to 2.75% for the second year.

However, the Federally Insured Deposits remain callable on each succeeding coupon payment date (semiannually) with 15 days notice.

The coupon will continue to "step up" until the final maturity date unless the Federally Insured Deposits is called before then.

Any redemption will be made at par plus any interest accrued to the call date.

If the Federally Insured Deposits  are held to maturity and not called, the issuer is obligated to pay to the owners of these "XYZ Bank" callable step-up Federally Insured Deposits  - par - plus the coupon payments for each of the 10 years as noted in the schedule.