Worked Example (10,000,000 USD, 7 Years)
Definitions.
Let G
be the guaranteed amount (USD), T
the term (years), and φ
the annual maintenance rate.
Given: G = 10,000,000 T = 7 φ = 0.35% = 0.0035
Upfront fee: U = 32,500 × ⌈ G / 10^6 ⌉
U = 32,500 × ⌈ 10,000,000 / 1,000,000 ⌉ = 32,500 × 10 = 325,000
Annual fee: A = φ × G = 0.0035 × 10,000,000 = 35,000 per year
Total (undiscounted): C = U + T × A = 325,000 + 7 × 35,000 = 570,000 USD
Optional present value with discount rate r:
PV = U + A × (1 − (1 + r)^{−T}) / r. Figures exclude bank charges, taxes, and third-party costs and assume a constant guarantee amount without early termination.