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Penfed Certificate EWP?

lou
  |     |   1,004 posts since 2010

So the PenFed EWP for a certificate greater than 6 month is equal to 30% of what would have been earned if the certificate had reached maturity, not to exceed total dividends earned. Let's say you wanted to cash in a 5-yr certificate on day one of the 4th year, how much interest do you think you would lose? Is it 30% of one year of interest remaining in the certificate or is it 30% of the entire 5 years of interest earned from the certificate?

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Answers
alan1
  |     |   877 posts since 2015
30 % of what _would_ have been earned _if_ the certificate had been held to maturity -- that's quite clear. In the case of a 5-year certificate that comes to 1.5 years of interest. For example, if someone closes the certificate before week before the maturity date, they would lose 1.5 years of interest, _not_ 2.1 days of interest.

I don't see the problem or any ambiguity. Ken Tumin has written about this on numerous occasions. On February 1, 2018, after quoting the language of the penalty, he wrote:

"_As you can see_, the EWP is harsh. For a 5-year term, 30% of total dividends is 18 months’ interest." (emphasis added)
(article -- "CD Rates Up at PenFed But There Are No Rate Leaders")

I agree with Ken Tumin -- it's easy to see.
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5
alan1
  |     |   877 posts since 2015
correction of typo in 2nd sentence of first paragraph above:
For example, if someone closes the certificate one week before the maturity date, they would lose 1.5 years of interest, _not_ 2.1 days of interest.

My apologies
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2
Ally6770
  |     |   4,294 posts since 2010
I would call them. Their reps are very good when I have contacted them.
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3


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