How is interest on a cash bond typically calculated?

The interest on a cash bond is typically calculated based on the rate equal to local government investment returns. This approach aligns the earnings from the cash bond with the potential returns that a local government can achieve from investing those funds in the open market. By using the local government's investment returns as the benchmark, it ensures that the interest earned on the cash bond is reflective of the financial environment in which the government operates.

This calculation method serves to incentivize local governments to utilize their funds effectively, ensuring that they are receiving a competitive rate of return that is in line with their investment strategies and financial policies. It helps municipalities manage their cash flow while adhering to standards and regulations governing public funds.