Abstract:
Data processing for novel form of relationship management links, supervises, and balances depositors, marketing agents, financial intermediaries, mortgage brokers, and borrowers in an inflation-adjusted financing program. Funds are deposited in participating financial institutions in return for certificates of deposit yielding a fixed rate of interest, plus principal growth at a yearly rate equal to that year&#39;s rate of growth in the Consumer Price Index-All Urban Consumers, All Items. Funds on deposit are loaned to borrower, either directly or through brokers, at a rate calculated by adding three components: a fixed debt service rate, a fixed constant interest rate, and an inflation factor interest rate which reflects the effects of inflation on the outstanding loan balance. Organizing company sychronizes entire program by contacting depositors through marketing agent, designating institutions to receive depositors&#39; funds, contacting borrowers directly or through brokers, and by supplying data processing capabilitites to financial intermediaries for purposes of impletation of the program and for analysis of the effects of the program on the intermediaries&#39; capital structures.

Description:
This application is a continuation of application Ser. No. 09/184,752 filed Nov. 2, 1998 now U.S. Pat. No. 6,052,673 entitled “System and Method of Investment Management Including Means to Adjust Deposit and Loan Documents for Inflation,” which is a continuation of U.S. application Ser. No. 07/780,834 now U.S. Pat. No. 5,832,461, filed Oct. 23, 1991, which is a continuation of Ser. No. 07/187,054, filed Apr. 27, 1988, now abandoned, which is a continuation of U.S. application Ser. No. 06/770,493 now U.S. Pat. No. 4,742,457, filed Aug. 27, 1985. 
    
    
     BACKGROUND OF THE INVENTION 
     1. Field of the Invention 
     This invention relates to financial management systems and, more specifically, to data processing methodology for effecting an improved capital structure in financial institutions. 
     2. Description of the Prior Art 
     A number of financial management systems have been proposed in the past. Exemplary systems include U.S. Pat. Nos. 4,194,242; 4,232,367; 4,321,672; 4,346,442 and 4,376,978. However, such prior systems address substantially different problems and accordingly, are substantially different from the inflation-adjusting program of the present invention. 
     During times of inflation, lenders and borrowers, whether they be institutions or individuals, must anticipate what the effects of inflation will be on the cash flow characteristics of a loan. Investors face a similar uncertainty. Traditionally, lenders compensate for this uncertainty by including a premium in the interest rate charged on the loan. This premium represents what the lender feels will be the level of inflation during the term of the loan. 
     Loans which include a fixed inflation compensation factor are not immune to the effects of inflation. For example, when a lender anticipates a 6% annual inflation over the life of a loan and the actual average inflation turns out to be 10%, the lender has realized a 4% annual loss in terms of real dollars. In addition, standard-fixed-payments loans (“SFPM&#39;s”) exhibit a progressive decline with time in terms of the flow of real dollars leading to a real-payment forward “tilt” characterized by a much greater equity accumulation during the early years of an extended loan. Conventional SFPM&#39;s are particularly burdensome in an inflationary environment in that they fail to account for appreciation of the mortgaged property. 
     In an attempt to compensate for such an eventuality, some lenders have offered loans or mortgages which include a floating interest factor that is periodically varied in some manner to compensate for the effects of inflation. One such alternative mortgage instrument is the adjustable rate mortgage, or “ARM”, which allows for periodic adjustment of payments to compensate for what the lender feels will be the inflationary effect on the loan during the upcoming period. For example, a typical ARM is indexed to a standard interest rate such as a particular bank&#39;s prime rate or six-month Treasury bill average. However, due to the fact that ARM&#39;s still reflect the market&#39;s “expectation” of the inflation rate, their inflation premiums may still not reflect the actual rate of inflation. 
     Two mortgage loan instruments which are directly indexed to inflation have been offered on a limited basis. One such instrument is the price-level adjusted mortgage, or “PLAM,” whose mortgage balance is periodically adjusted to account for the effects of inflation during the interval since the previous adjustment. PLAM&#39;s have generally been indexed to one of the various consumer price indexes. Such indexing of the PLAN loan balance results in the deferral and capitalization of additional interest. The resulting PLAM loan serves to even out equity accumulation during the life of the mortgage in contrast to SFPM&#39;s. 
     Another indexed mortgage instrument is the “modified” PLAM which combines some aspects of the traditional fixed rate mortgage with those of the PLAM. In particular, the modified PLAM has a fixed interest rate which includes a specified inflation factor and, in addition, has a variable interest rate which will compensate the lender for inflation over and above the specified inflation factor. 
     Inflation-indexed loan instruments have advantages in that inflation risk to the lender is minimized. For example, with SFPM&#39;s during periods of inflation, the borrower realizes a windfall in terms of actual dollars where the loan rate is based on a low level of anticipated inflation. Conversely, the lender has suffered a loss in terms of real dollars. Inflation indexed loans serve to solve this problem. However, the borrower under such instruments still faces much uncertainty: when inflation spirals, so do the loan payments. If inflation operates similarly on the mortgaged or secured property, there is no loss in terms of real dollars. However, if the value of the property securing the loan does not inflate at the same rate as the loan balance, there is potentially an inflation loss. 
     Such problems have in the past prevented large-volume or commercial borrowers from taking advantage of inflation-indexed loans. That is, the uncertainty over whether the return on inflation-indexed borrowed funds which have been reinvested, will compensate for the “cost” of those funds. This problem of unbalanced investments and loans is seen most acutely where one wishes to invest in a manner that will assure an inflation-adjusted return on the investment. One answer would be for institutions to accept investment capital into deposit accounts which insure an inflation-adjusted return on the deposited funds. However, the risk to the lending institution is clear: such inflation-adjusted deposit accounts must in some manner be backed by inflation-adjusted dollars. Equally important, institutions engaged in lending and borrowing funds require the ability to match funds which have been obtained on an inflation-indexed basis with some similarly indexed funds which are lent out. Moreover, such institutions require the ability to assess the impact of inflation-adjusted deposit and loan accounts on their capital structure. 
     Accordingly, the present invention addresses these problems by providing a system for implementing inflation indexed deposit accounts, for matching such accounts with similarly indexed loan accounts and for anticipating the effects of these accounts on the existing capital structures of the institution or investor. 
     SUMMARY OF THE INVENTION 
     The foregoing and other problems of the prior art are solved by the system of the present invention which institutes inflation-adjusted deposit and loan accounts and matches such accounts to provide an improved capital structure for a financial institution. The system projects the impact of inflation-indexed deposit and loan accounts on the institution&#39;s capital structure for preselected or anticipated inflationary environments. Based on such projections and other general considerations, one of several forms of deposit accounts is selected according to the requisites of the depositor or borrower and those of the institution. 
     As contemplated under the present invention, the accounts are characterized by a principal component and an accrual component. Principal component is that proportion of the overall account balance attributable to the initial cash investment. The accrual component indicates that proportion of the overall account balance attributable to inflation and fixed interest. The account components are periodically enhanced or reduced in a manner specified by the characteristics of the particular account selected. 
     The accrual component will generally include both a fixed interest component and a variable interest component with the variable interest component being responsive to the rate of inflation. Responsive to the rate of inflation, as used herein, means directly responsive to a market indicator of prior actual inflation as it is not meant to include the market&#39;s expectation of future inflation. Under one alternative, the principal component is enhanced by the variable interest component and the account retired by retiring the fixed interest component by one schedule and retiring the principal component by a second schedule. However, the account may be retired by retiring both components over a similar schedule or by amortization. By varying the manner in which each respective component is accrued or retired, the cash flow characteristics of the account can be significantly altered to fit the requisites of the individual or institution. Cash flow is defined as the overall flow of cash units from the account, or a selected account component, to the account holder who will either be the lender or depositor, at a specified time. 
     Since the accrual component of either loan or deposit accounts may be adjusted in response to inflation, they can potentially exhibit unfavorable cash flows. Therefore, it is generally desirable to match loan accounts with deposit accounts, and further generally desirable to match accounts with similar intrinsic cash flow characteristics as specified by their accrual and retirement features. In this manner, cash flow patterns of the loan account would mirror those of the matched deposit account. Thus, during times of inflation, for example, negative cash flows attributable to outgoing retirement payments on deposit accounts will be compensated for by incoming payments on loan accounts. 
     Once the appropriate form of deposit and loan accounts are selected, matched and placed with the institution, data processing is utilized to service them during their respective terms. As referred to herein, the account term is the time period over which the account is retired or “paid out” to the account holder. The account term is generally divided into a plurality of adjustment or iteration periods, however, terms may be scheduled to include only a single iteration. Servicing includes the determination of inflation adjustments to the account balance or, alternatively, the inflation premium due the account holder. Servicing also includes features which protect the principal or balance of the accounts from the effects of deflation and reports all bookable income to holder. 
     Servicing further includes data processing for retiring and enhancing the accounts according to their respective terms and schedules. Retirement is meant to include a reduction in the particular account component and enhancement is meant to include an increase or accrual of the particular account component. For example, accrual components may be retired separately from the principal component by selecting separate schedules for each. Thus, for example, the principal may be retired semi-annually and the accrual retired annually. Schedules may be selected which adjust particular components by a predetermined amount. Alternatively, account components may be retired by amortization. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         FIG. 1  is an overall schematic view of the inflation-adjusting account management system of the present invention; 
         FIG. 2  is a flow diagram of the steps for servicing Group I deposit or loan accounts; 
         FIG. 3  is a flow diagram of the steps for servicing Group II deposit or loan accounts; 
         FIG. 4  is a flow diagram of the steps for servicing Group IV deposit or loan accounts; 
         FIG. 5  is a schematic, view of the deposit/loan matching process; 
         FIG. 6  is a graphic display of year-end balances and adjustment amortization of a typical Group IV Deposit Account; 
         FIG. 7  depicts the total principal and interest payments on the hypothetical Group IV deposit account of  FIG. 6 ; 
         FIG. 8  is a graphic display of the bookable income components of the hypothetical Group IV deposit account of  FIG. 6 ; 
         FIG. 9  graphically compares the cash flows generated by a Group IV deposit account assuming a steady 8% inflation rate with the same account assuming a steady 6% inflation rate; and 
         FIG. 10  is a graphic display of the buildup of positive cash flow from an original $100 Group IV deposit account as a standard-fixed-payment loan. 
     
    
    
     DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS 
     The System 
     Referring now to  FIG. 1 , there is shown in overall scope an operational flow chart for implementing the deposit/loan inflation-adjusting system of the present invention. As therein depicted, the broad aspects of the system include an inflation-adjusted deposit account  2 , an inflation-adjusted loan account  4 , an intermediary institution  6  and an account management dataprocessor  8 . 
     In the most basic embodiment of the present invention, the intermediary institution  6  receives deposited funds in deposit accounts  2  and lends funds through loan accounts  4 . Retirement of these inflation-adjusted accounts are implemented by account management dataprocessor  8 . Such data processing services the inflation-adjusting accounts in a number of ways, including the determination of their cash flow characteristics in changing inflationary environments and determining the anticipated effects of inflation on the account balance. Characteristics of the individual accounts are tailored to meet the needs of the particular depositor. 
     However, as illustrated in  FIG. 1 , the system of the present invention need not be limited to the three above mentioned fundamental aspects. In a preferred embodiment, an organizing company  10  acts as a synchronizer by contacting depositors  12  through intermediary  6  or through a marketing agent  14 , for example, a pension fund manager. Depositor characteristics are listed on a Deposit Funds Available Data File  16  (“DFADF”), wherein characteristics listed include a depositor identifier, the amount of funds available, the term of the account, the duration of the account, the type of account and the account retirement schedule. The amount of funds available is the total amount of funds sought to be deposited by the depositor. The term of the account is the length of time from the initial deposit until maturity (i.e., when the account has been entirely retired). The duration of the account, explained more fully below, is a mathematical expression of when the average time-weighted dollar is paid out of the account. The type of account, also explained in greater detail below, represents the particular accrual and retirement features of the deposit account. The retirement schedule refers to the timing of the iteration or payback periods and may include a predetermined retirement amount where appropriate. 
     Characteristics of borrowers  18  are similarly listed in a Loan Funds Desired Data File  20  (“LFDDF”), which includes the amount of funds sought to be borrowed, the term of years for which the funds are desired, the duration of the loan account, the type of loan account and the loan account retirement schedule. Additional parameters such as credit rating of the borrower or capacity of the lenders are generally included in the LFDDF or DFADF. Capacity represents the total funds the lending institution may wish to devote to particular categories of loan transactions, for example, commercial development loans. 
     Data processing capabilities are supplied for displaying and choosing the particular inflation-indexed account characteristics and for servicing the accounts once installed. Organizing company  10  may also act as a matching agent to receive deposit commitments from depositors  12  or marketing agent  14  and place such commitments with intermediary  6  that may require inflation-indexed deposit funds to back similarly indexed mortgage loans. Again, intermediary  6  acts as the actual conduit for the passage of funds but may rely on organizer  10  to match indexed deposit contributors with borrowers and/or to service accounts  2 , 4  once they are installed. 
     Servicing the Accounts 
     In general, four basic types of accounts, represented by the designations Group I, II, III or IV, are contemplated under the present invention. These accounts vary in terms of their cash flow, principal repayment and interest accrual characteristics. They can be characterized as having a principal component, which initially a represents the sum deposited or loaned, and an accrual component, which represents that portion of the balance that is attributable to the effects of interest, servicing fees and inflation on the principal. However, the accounts of the present invention may vary in terms of how and to what extent interest accrues, whether the interest is “payed out” or reinvested into the overall account balance, and how the account is retired over a selected term. 
     In their most basic embodiment, Group I accounts include those accounts wherein the fixed-interest and inflation-adjusted interest components are retired as they accrue. In Group II accounts, both the fixed and adjustable components are retained as principal and thus add to the overall account balance. In Group III and IV accounts, the fixed interest component is payed out as it accrues and the adjustable component is added to account balance. Group III and IV accounts differ in that Group IV accounts are retired by amortizing the account balance at each iteration period whereas Group III accounts are retired by a predetermined portion at each iteration period with the remaining balance being retired at the final iteration. 
     Referring to  FIG. 2 , is shown a flow chart, adaptable to data processing, for servicing what are referred to herein as Group I deposit or loan accounts. Group I accounts are characterized by a non-adjusted principal which is retired over a series of predetermined intervals or iterations. Alternatively, the principal may be retired in one lump sum payment at maturity. Because Group I accounts do not have adjusted principals, their accrual components are also retired at predetermined intervals over the life or term of the accounts. As with the principal retirement, the accrual component may be retired in one lump sum payment at the end of the term. Alternatively, the accrual retirement may be scheduled in a separate fashion from the principal retirement. 
     Generally, the Group I principal retirement schedule will consist of the retirement of the entire principal at the end of the term of the instrument. The accrual component, on the other hand, is retired as it accrues at each iteration period, and does not accumulate or enhance the principal. This results in an instrument having cash flows closely resembling those of a “conventional” certificate of deposit or bond (“conventional” referring to payment of a fixed rate of interest) with the difference that accrual payments will vary with the rate of inflation. Therefore, the cash flow characteristics of Group I accounts can be characterized generally as low during the term of the instrument, with a large payment at the end. However, other principal retirement schedules are possible within the Group I framework, and cash flows could be accelerated through earlier payments of a portion of the principal. 
     As displayed in the flow diagram of  FIG. 2 , Group I accounts are serviced by first ascertaining, for example from DFADF or LFDDF, the initial balance, the fixed interest rate to be paid, the inflation index at the time of the deposit or loan, the total number of iterations or adjustment periods, and the schedules by which the principal and accrual components are to be retired. Proceeding through the flow diagram, the first operator, Ir=Ir−1, serves as a counter to determine the number of iterations remaining in the scheduled account term. The amount of the principal to be retired by cash disbursement to the account holder is determined by reference to the schedule. Once the current inflation index (CPIc) is determined, the level of inflation since the last reporting period is estimated by consideration of a preselected inflation index which reflects prior actual inflation. A preferred embodiment of the present invention utilizes the consumer price index CPI-U, for all items. However, any number of indexes may be successfully utilized including, but not limited to CPI-W, Producer Price Index, the Implicit Price Deflator for the Gross National Product, or any component of these price level measures so long as the index reflects some measure of past inflation. The level inflation which has occurred since the previous iteration period can be determined by the formula: 
               CPIc   -   CPIo     CPIo         
Where CPIo id the inflation index at the time of the last iteration, or the initial index if the present iteration is the first.
 
     The account servicing scheme makes the determination as to whether deflation has in fact taken place since the previous reporting period or iteration period. This test serves to protect against a possible negative cash flow which could result during deflationary periods. If deflation has taken place, no adjustment is made to the balance in response to the deflation, rather, deflation credits are stored and subsequently retired when inflation returns. Deflation credit is accumulated with deflation credit from prior iteration periods, if any, in the form of cumulative deflation credit (“CDC”). 
     If, alternatively, inflation has occurred during the prior iteration period, the cash outflow or disbursement attributable to the effects of inflation on the account balance is determined by applying the inflation rate to the deposit balance. If the cumulative deflation credit is greater than the inflation disbursement, the CDC is reduced by that amount and the accrual disbursement to depositors is determined by applying the fixed interest rate to the principal. 
     If the CDC value is less than or equal to the calculated inflation disbursement factor, the disbursement factor is reduced in proportion to the CDC, if any, and the CDC set to zero. Accrual repayment is determined by applying the fixed interest rate to the balance and adding the product to the inflation disbursement factor. The account balance is adjusted to reflect both the principal and accrual retirement. Following a test to determine whether any iteration periods remain, the initial CPI (CPIo) is reset to equal the current CPI (CPIc), to allow for inflation rate determination at the next cycle. 
     Group II deposit accounts are characterized by a principal component that is enhanced by the accrual component. Thus, principal growth is observed on the one hand and the account is retired by retiring only the principal. Since all inflation and interest adjustments on the account serve to enhance the principal, only one schedule of retirement is required. Group II accounts will generally demonstrate cash flows which do not react as quickly to rising inflation as those of Group I accounts. This is due to the fact that the accrual component of Group II accounts are not necessarily paid out in their entirety at each iteration period as in Group I accounts. Rather, the accrual is retained as principal and retired by a preselected schedule, for example, by retiring a predetermined portion at each iteration period. This results in a straight-line reduction of the account balance during the account term followed by a lump sum payment of the remaining balance at maturity. Alternatively, a schedule may be selected where the entire account is retired by one lump sum payment at maturity with no intervening retirements. 
     Referring now to  FIG. 3 , is shown a flow chart for servicing Group II accounts. As with Group I accounts, the parameters of initial account balance, fixed interest rate to be charged, the initial inflation index (CPIo), number of iteration periods, and account retirement schedules are supplied. The amount of principal to be retired is then determined by reference to the schedule. This amount is disbursed to the account holder. 
     The inflation rate is estimated and tested for deflation. If deflation has taken place, deflation credit is calculated and accumulated. If, alternatively, inflation has occurred, the amount of principal adjustment is determined by determining the product of the inflation rate and the account balance prior to the present retirement. Fixed adjustment is represented by the product of the fixed interest rate and the balance. When the cumulative deflation credit (CDC) is greater than the inflation adjustment for any given iteration period, the CDC is reduced in proportion to the inflation adjustment and the account balance adjusted to reflect the principal retirement and enhanced to reflect the fixed adjustment. 
     Alternatively, when the inflation adjustment is higher than the CDC, the inflation adjustment is reduced in proportion to the CDC and the CDC reset to zero. Balance adjustment is accomplished by reducing the balance in proportion to the principal repayment and enhanced in proportion to fixed and inflation adjustment. Although under Group II accounts, actual cash flow consists of the principal retirement, “bookable” cash flow is represented by both principal retirement and inflation and fixed adjustments to the principal. Thus, this “bookable” inflation adjustment factor is reported to the account holder or borrower for, for example, income tax purposes. 
     Group III and IV accounts are characterized by an accrual component that is divided into a fixed interest component and a variable interest component with the variable component being responsive to inflation. For both Group III and IV accounts, the fixed interest component may be viewed as a part of the depositor&#39;s interest on the balance, and retired by a preselected schedule over the term of the deposit or by amortization. However, the variable interest component serves to enhance the principal and therefore represents a deferral and capitalization of interest into the principal. Therefore, principal growth is observed. 
     Group III and IV accounts differ in terms of how their respective adjusted principals are retired. In Group III deposits, the principal is retired by a preselected schedule over the term. Alternatively Group IV accounts have principals which are retired by amortization.  FIG. 4  is illustrative of the mechanics of Group IV accounts. As depicted therein, Group IV accounts are serviced by first determining the preliminary series of variables: the amount of the initial deposit, the fixed interest rate to be paid, the inflation index at the time of the deposit (CPIo), the total number of iterations or adjustment periods (Ir) and the retirement schedule. 
     Proceeding through the flow chart of  FIG. 4 , as with the previous accounts the first operator counts the number of iterations remaining in the scheduled account term. The account balance amortization is calculated to determine that portion of the principal to be retired at that iteration period. In particular, amortization of the balance is achieved using the formula: 
     
       
         
           
             R 
             = 
             
               A 
               PVIF 
             
           
         
       
     
     where:
         R is the payment due the account holder;   A is the amount of the balance to be amortized; and   PVIF is defined as       

     
       
         
           
             
               ∑ 
               
                 I 
                 = 
                 1 
               
               N 
             
             ⁢ 
             
                 
             
             ⁢ 
             
               ( 
               
                 1 
                 
                   
                     ( 
                     
                       1 
                       + 
                       i 
                     
                     ) 
                   
                   ⁢ 
                   I 
                 
               
               ) 
             
           
         
       
         
         
           
             
               
                 where N is the number of iteration periods remaining +1, and i is the fixed interest rate 
               
             
           
         
       
    
     The fixed interest component is calculated by applying the fixed interest rate to the account balance. Once determined, fixed interest component is generally retired during the present iteration by disbursement to the account holder. Alternatively, the fixed component may be withheld for later retirement, depending upon the requirements of the particular schedule. 
     The inflation rate is estimated and tested for deflation. With Group IV accounts, during times of deflation, one would expect a diminishment of the balance in proportion to the resultant increase in “real” dollars on deposit. However, the present system avoids this diminishment by storing deflationary units in the form of deflation credit. As with the foregoing account groups, deflation credit is cumulated, reserved and not applied against the account balance until inflation resumes to a sufficient level to counter it. 
     Thus, when the inflation adjustment is greater than the CDC, the account balance is reduced in proportion to the principal retired and enhanced in proportion to the level of inflation. If deflation credit has accumulated to a greater extent than the inflation adjustment during the prior iteration period, the balance is reduced only in proportion to the principal retirement. Once a new balance is established, the iteration cycle is completed by testing whether the present cycle represents the final iteration period and, if not, by setting the index level of the present cycle equal to the initial index for use in the next cycle. 
     The flow chart of  FIG. 4  may be modified to service Group III accounts by retiring a set proportion or amount of the balance instead of amortizing the balance. Since such a retirement is of a “preselected amount,” the final iteration may include a lump sum payment of the balance which remains. That is, the principal retirement of Group III accounts, being a preselected amount, would not necessarily track the inflation adjustments, thus potentially leaving an unretired portion due the account holder at maturity. 
     Matching Deposit Accounts with Loan Accounts 
     During times of high inflation, an inflation-indexed deposit account, standing alone, would present a substantial risk to the capital structure of the institution that receives and services them. This is the result of the fact that more inflated dollars must necessarily be deposited into the account by the institution at each iteration period to maintain a constant account balance in terms of real dollars. To remove this risk, the present invention provides a system for matching the foregoing inflation-adjusted deposit accounts with loan accounts. 
     Referring to  FIG. 5 , is shown in representative fashion, a flow diagram of the matching process. Investors or Depositors  12  direct Deposit Account Manager  14 , for example, a pension fund manager, to file Notice of Availability  24  (“NA”) of funds for inflation-adjusted deposit accounts  2  with organizing company  10 . Alternatively, those investors  26  not represented by account manager  14  file NA  24  directly with organizing company  10 . Similarly, borrowers  18  or loan account managers  22 , for example, mortgage brokers, file Notice of Demand  28  (“ND”) for inflation-adjusted loan funds. Both ND  28  and NA  24  include such parameters as amount of funds available or demanded term of account, duration of account, and type of account including its proposed schedule. Independent variables such as credit rating of borrower  18 , characteristics of project for which funds are sought and underwriting constraints if any, may be included in the ND  28 . Organizing company  10 , or alternatively intermediary  6  lists the characteristics on parallel databases, DFADF  16  and LFADF  20 , representing supply funds and demand funds, respectively. 
     Accounts are matched by matching parameters stored in DFADF  16  or LFDDF  20  to create a Hierarchical Matching File  30  (“HML”). Parameters of the demand and supply files  16 , 20  are thus matched according to hierarchal considerations generally including account amount, term and duration as primary considerations. A plurality of loans may be matched with a single deposit, or a plurality of deposits with a single loan, in order to match the overall amounts. In situations where a plurality of loans are matched with a plurality of deposits, the various amounts are totaled to achieve a total balance match. 
     Duration is a mathematical expression of when the average time-weighted dollar is either received or paid out of a particular account. It provides information concerning the size and timing of the payment stream or cash flow of the account. Moreover, duration embodies an expression of the relation of payment or disbursement size to yield-to-maturity of the account. The mathematical expression of the formula is: 
             D   =         ∑     t   =   1     m     ⁢           ⁢       txCF   +         (     1   +   r     )     t             ∑     t   =   1     m     ⁢           ⁢       CF   +         (     1   +   r     )     t                 
Where D=duration, r=yield-to maturity, t=time of cash flow, m=term and CF + =cash flow at time, t.
 
     When this formula is applied for example, to a $1,000 standard-fixed-payment deposit account with a five-year term and 12% total annual interest, the calculated duration is 4.04 years. That is, the average time-weighted dollar is paid out at 4.04 years. In general, group I accounts will show greater cash flows early in their terms relative to group II accounts, therefore group I accounts will often have lower durations than scheduled group II accounts. The duration of Group III and IV accounts will generally fall between that of Group I and II accounts. Therefore, duration is an expression of the average cash flow of the account. In matching the duration of a loan account with that of a deposit account, or in matching the average duration of a plurality of accounts, the cash flows of deposit and loan accounts so matched will compensate for one another, thereby protecting the capital structure of the intermediary. 
     After matching is achieved by the HMF  20 , borrowers  18  and depositors  12 , or their respective account managers  22 , 14 , are notified of the match and deposit and loan accounts  2 , 4  are formalized  32  followed by the transfer of funds  34  to intermediary  6 . Accounts will then be serviced by the account management dataprocessor  8 . 
     Example I 
     Servicing of Inflation—Adjusted Deposit Accounts 
     Data processing and post-data processing activities are utilized to service the Group IV deposit accounts of the present invention by periodically adjusting the outstanding balance of the account to reflect the effects of inflation on it. 
     a. Mechanics of a Typical Group Iv Deposit Account 
     Referring to  FIG. 6  is shown a representative example of a hypothetical Group IV deposit account in terms of its year-end balance and adjustment amortization. The deposit account therein depicted assumes an initial balance of $100, a fixed annual interest rate of 4%, a steady inflation rate 8% (e.g., an 8% steady annual increase in the CPI), a 30-year term with 30 annual iteration periods, and a schedule which retires the fixed interest component as it accrues (i.e., annually). 
     As will be appreciated by those skilled in the art, the deposit account of the present example is somewhat similar to a 30-year annuity which is supplemented annually with additional annuities to reflect the higher price level in the economy. Thus, the fixed amortization rate becomes a real interest rate because the depositor also receives additional interest equal to the inflation rate multiplied by the account balance. Each iteration period, if there is a positive increase in the CPI, additional inflation interest accrues but it is payable over the remaining term as an additional stream of annuity payments. The deposit account can be viewed as 30 separate annuities with an original annuity and potentially  29  annual inflation additions. 
     The depositor&#39;s total receipts (including principal and interest) on the deposit account increase in lock-step with the CPI so that the payment the depositor receives is constant in real purchasing power. In this graphical presentation the inflation rate is a steady 8% for the entire 30-year term of the account so the depositor&#39;s payment increases by 8% each year. The deposit balance changes on any distribution date since inflation interest is added to the deposit balance and the annuity payment retires a portion of the existing principal with each iteration.  FIG. 7  depicts the total principal and interest payment of the hypothetical account of  FIG. 6 . As will be appreciated, the payments to the account holder increase substantially over time.  FIG. 8  graphically displays the “bookable” income components of the periodic retirements of the hypothetical deposit account. Note that the interest payments on the original deposit decreases in “straight-line” fashion with time, whereas the bookable accrued inflation adjustment and interest on accrued adjustment peak at approximately year 21 before declining. 
     b. Comparing the Effects of Anticipated Levels of Inflation on the Account 
     The data processing methodology of the present invention may be used to compare the cash flow characteristics of a particular type of deposit account for selected or anticipated levels of inflation. For example, Table I, which was generated using the servicing scheme of  FIG. 4 , numerically displays the cash flow characteristics of the typical Group IV account of the present example (i.e., it assumes an 8% level of inflation and a 4% fixed interest rate). Depicted therein are the periodic (i.e., yearly) bookable inflation adjustment, interest earned, deposit returned (i.e., principal retired), year-end account balance and the net cash flow. 
     Table II was also generated using the flow scheme of  FIG. 4  and displays the cash flow characteristics of the same Group IV account but including an anticipated inflation rate of 6% instead of 8%. All other variables, including the term, deposit amount and fixed interest rate, are the same. The comparative cash flows for 8% and 6% inflation are displayed graphically in  FIG. 9 . Note 
     
       
         
               
               
               
               
             
               
             
               
               
               
               
               
               
             
               
               
               
               
               
               
             
           
               
                 TABLE I 
               
             
             
               
                   
               
               
                 DEPOSIT AMOUNT: 
                 $100.00 
                 INTEREST RATE: 
                 4.00% 
               
               
                 TERM IN YEARS: 
                 30 
                 INFLATION: 
                 8.00% 
               
             
          
           
               
                 ANALYSIS FOR DEPOSITOR: 
               
             
          
           
               
                   
                 BOOK- 
                   
                   
                   
                   
               
               
                   
                 ABLE 
                   
                   
                   
                   
               
               
                   
                 INFLA- 
                   
                   
                 YEAR 
                   
               
               
                   
                 TION  
                 INTER- 
                 DEPOSIT 
                 END 
                   
               
               
                   
                 ADJUST- 
                 EST 
                 RE- 
                 BAL-  
                 CASH 
               
               
                 YEAR 
                 MENT 
                 EARNED 
                 TURNED 
                 ANCE 
                 FLOW 
               
               
                   
               
             
          
           
               
                 0 
                   
                   
                   
                 100.0000 
                   
               
               
                 1 
                 8.0000 
                 4.0000 
                 1.7830 
                 106.2170 
                 5.7830 
               
               
                 2 
                 8.4974 
                 4.2487 
                 2.0054 
                 112.7090 
                 6.2540 
               
               
                 3 
                 9.0167 
                 4.5084 
                 2.2556 
                 119.4701 
                 6.7640 
               
               
                 4 
                 9.5576 
                 4.7788 
                 2.5374 
                 126.4903 
                 7.3162 
               
               
                 5 
                 10.1192 
                 5.0596 
                 2.8546 
                 133.7550 
                 7.9142 
               
               
                 6 
                 10.7004 
                 5.3502 
                 3.2117 
                 141.2436 
                 8.5619 
               
               
                 7 
                 11.2995 
                 5.6497 
                 3.6140 
                 148.9292 
                 9.2637 
               
               
                 8 
                 11.9143 
                 5.9572 
                 4.0671 
                 156.7764 
                 10.0243 
               
               
                 9 
                 12.5421 
                 6.2711 
                 4.5777 
                 164.7408 
                 10.8487 
               
               
                 10 
                 13.1793 
                 6.5896 
                 5.1531 
                 172.7669 
                 11.7427 
               
               
                 11 
                 13.8214 
                 6.9107 
                 5.8018 
                 180.7865 
                 12.7125 
               
               
                 12 
                 14.4629 
                 7.2315 
                 6.5334 
                 188.7160 
                 13.7648 
               
               
                 13 
                 15.0973 
                 7.5486 
                 7.3587 
                 196.4546 
                 14.9073 
               
               
                 14 
                 15.7164 
                 7.8582 
                 8.2901 
                 203.8809 
                 16.1483 
               
               
                 15 
                 16.3105 
                 8.1552 
                 9.3418 
                 210.8496 
                 17.4971 
               
               
                 16 
                 16.8680 
                 8.4340 
                 10.5301  
                 217.1875 
                 18.9640 
               
               
                 17 
                 17.3750 
                 8.6875 
                 11.8734  
                 222.6891 
                 20.5609 
               
               
                 18 
                 17.8151 
                 8.9076 
                 13.3934  
                 227.1108 
                 22.3009 
               
               
                 19 
                 18.1689 
                 9.0844 
                 15.1147  
                 230.1650 
                 24.1992 
               
               
                 20 
                 18.4132 
                 9.2066 
                 17.0665 
                 231.5117 
                 26.2731 
               
               
                 21 
                 18.5209 
                 9.2605 
                 19.2828  
                 230.7498 
                 28.5433 
               
               
                 22 
                 18.4600 
                 9.2300 
                 21.8042  
                 227.4055 
                 31.0342 
               
               
                 23 
                 18.1924 
                 9.0962 
                 24.6798  
                 220.9181 
                 33.7760 
               
               
                 24 
                 17.6735 
                 8.8367 
                 27.9704  
                 210.6212 
                 36.8071 
               
               
                 25 
                 16.8497 
                 8.4248 
                 31.7537  
                 195.7173 
                 40.1785 
               
               
                 26 
                 15.6574 
                 7.8287 
                 36.1347  
                 175.2399 
                 43.9634 
               
               
                 27 
                 14.0192 
                 7.0096 
                 41.2673  
                 147.9919 
                 48.2769 
               
               
                 28 
                 11.8393 
                 5.9197 
                 47.4090 
                 112.4222 
                 53.3287 
               
               
                 29 
                 8.9938 
                 4.4969 
                 55.1089 
                 66.3071 
                 59.6058 
               
               
                 30 
                 5.3046 
                 2.6523 
                 66.3071 
                 5.3046 
                 68.9594 
               
               
                   
               
               
                 *THE BOOKABLE INFLATION ADJUSTMENT FOR THE 30TH YEAR WILL BE ADDED TO THE OTHER CASH FLOW COMPONENTS AND PAID AT THAT TIME, SO THE FINAL BALANCE WILL BE 0. 
               
             
          
         
       
     
                                                                                           TABLE II                   DEPOSIT AMOUNT:   $100.00   INTEREST RATE:   4.00%       TERM IN YEARS:   30   INFLATION:   6.00%            ANALYSIS FOR DEPOSITOR:                BOOK-                           ABLE                           INFLA-           YEAR               TION    INTER-   DEPOSIT   END               ADJUST-   EST   RE-   BAL-    CASH       YEAR   MENT   EARNED   TURNED   ANCE   FLOW                    0               100.0000           1   6.0000   4.0000   1.7830   104.2170   5.7830       2   6.2530   4.1687   1.9676   108.5024   6.1363       3   6.5101   4.3401   2.1715   112.8411   6.5116       4   6.7705   4.5136   2.3966   117.2150   6.9102       5   7.0329   4.6886   2.6452   121.6026   7.3338       6   7.2962   4.8641   2.9199   125.9789   7.7840       7   7.5587   5.0392   3.2234   130.3142   8.2626       8   7.8189   5.2126   3.5588   134.5743   8.7713       9   8.0745   5.3830   3.9294   138.7194   9.3124       10   8.3232   5.5488   4.3392   142.7034   9.8879       11   8.5622   5.7081   4.7922   146.4733   10.5004       12   8.7884   5.8589   5.2933   149.9684   11.1523       13   8.9981   5.9987   5.8478   153.1187   11.8465       14   9.1871   6.1247   6.4614   155.8445   12.5861       15   9.3507   6.2338   7.1408   158.0543   13.3746       16   9.4833   6.3222   7.8934   159.6442   14.2156       17   9.5787   6.3858   8.7276   160.4953   15.1134       18   9.6297   6.4198   9.6528   160.4722   16.0726       19   9.6283   6.4189   10.6798   159.4207   17.0987       20   9.5652   6.3768   11.8209   157.1651   18.1977       21   9.4299   6.2866   13.0904   153.5046   19.3770       22   9.2103   6.1402   14.5051   148.2097   20.6453       23   8.8926   5.9284   16.0849   141.0174   22.0133       24   8.4610   5.6407   17.8542   131.6243   23.4949       25   7.8975   5.2650   19.8439   119.6779   25.1089       26   7.1807   4.7871   22.0958   104.7627   26.8829       27   6.2858   4.1905   24.6706   86.3779   28.8611       28   5.1827   3.4551   27.6710   63.8896   31.1262       29   3.8334   2.5556   31.3184   36.4045   33.8740       30   2.1843   1.4562   36.4045   2.1843   37.8607               *THE BOOKABLE INFLATION ADJUSTMENT FOR THE 30TH YEAR WILL BE ADDED TO THE OTHER CASH FLOW COMPONENTS AND PAID AT THAT TIME, SO THE FINAL BALANCE WILL BE 0.            
that there is a significant increase in payments in the later years of the Group IV account term with 8% when compared to 6% inflation.
 
     Thus, by inserting various anticipated inflation rates into the servicing schemes of the present invention, the effects of inflation on the resultant cash flows of the account may be ascertained. In this manner, the effects of such accounts on the capital structure of the account holder may be anticipated and both cases prove that the depositor would receive a stream of payments with constant buying power at any time in the future regardless of the behavior of inflation. 
     Example II 
     The Partially-Hedged Program 
     A lending institution, under certain circumstances, may desire to match an inflation-adjusted deposit account with a standard-fixed-payment mortgage loan. Under such a “partially-hedged” match, the net cash flow to the institution during periods of lower inflation will be higher than during periods of high inflation. That is, the standard-fixed-payment loan will generate a fixed cash flow whereas the deposit account must be satisfied with the inflation-adjusted dollars. 
     For example,  FIG. 10  displays the buildup of positive cash flow from an original $100 inflation-adjusted Group IV deposit account and a standard-fixed-payment loan program which are tracked for 30 years under the assumption that the deposits were used to fund 5-year loans at 10.5%, payable monthly, with principal amortized in equal semiannual payments and with net cash flows reinvested immediately on the same basis. These loan proceeds are compared to the cash obligations on the deposit account. 
     These calculations from a simultaneous deposit-loan transaction do not include any of the costs of loan administration or the servicing costs of the deposit account, which is minimal with large institutional deposits. The servicing fee has been netted out but there is no need to deduct the customary costs of a retail deposit activity from this spread. 
     Though the net interest spread is quite large not all of this cash flow needs to be immediately reflected as income for tax purposes since the inflation adjustment interest must be recognized as an expense for accounting and tax purposes. The accrual of the interest expense has the effect of reducing taxable income in the early years of the deposit account term. The accrual of the inflation adjustment interest to the deposit account balance is accurately reflected in the intermediaries&#39; deposit liabilities and also in the intermediaries&#39; net worth. 
     Table III shows both asset and liability balance adjustments through the 30-year term on the original $100 deposit and loan as well as the net return on assets. Even with only a 10.5% loan fixed rate, the net return on assets is reasonably high at 1.11% and grows over time. Tables IV and V convey the same information under an assumed loan rate of 11.5% and 12.5%, respectively. As one of skill in the art will appreciate, these higher loan rates substantially increase the net return on assets. 
     Interest Rate Risk 
     The actual net income and return on assets would depend on the spread of the loan rate above the cost of funds. The cost of funds in turn depends on the inflation rate. In a fixed rate market with a 10.5% prime rate and less than 4% inflation the spread is quite large and would result in a return on assets of approximately 2.5% if all funds were loaned out at prime. 
     An acceleration in inflation rates causes financial markets to adjust to higher inflation rates by increasing interest rates. If a surge of inflation were to occur this would work to the intermediary&#39;s benefit. Since short-term loan rates are highly sensitive to an acceleration of inflation, revenues should respond immediately whereas the inflation interest cost accrues but is paid out smoothly over time. 
     Furthermore, the market&#39;s response to inflation causes bank loan rates to increase more than the inflation rate. For example, in 1979 when inflation rates peaked out at 13%, prime reached 21% which would have substantially increased the bank&#39;s cash flows and after tax spreads. Acceleration of inflation and interest rates insulates the commercial bank from the payment shock of higher money market CD rates and widens the spread. 
     Generally with high interest rates and tight monetary policy there is a yield curve inversion in which shortterm rates exceed long-term rates. This too would open enormous profit opportunities for the commercial intermediary since the inflation-adjusted deposit funds are borrowed long and lent short. 
     The more significant risk to the commercial intermediary is from a reduction of inflation and interest rates. This, however, presents no special difficulties because the inflation interest is scaled down to the actual inflation rate. From the lending side lower 
     
       
         
               
               
             
               
               
               
               
             
               
               
               
             
               
               
               
               
             
               
               
               
               
             
               
               
               
               
               
               
               
               
               
               
             
           
               
                 TABLE III 
               
               
                   
               
             
             
               
                 AB DEPOSIT INFORMATION 
                 LOAN INFORMATION 
               
             
          
           
               
                 INITIAL DEPOSIT: 
                 $100 
                 TERM &amp; AMORTIZATION: 
                 OPTIONAL 
               
               
                 TERM (years): 
                 30 
                 LOAN &amp; REINVESTMENT RATE (1): 
                 10.50% 
               
               
                 REAL INTEREST RATE: 
                 3.50% 
                 ORIGINATION FEE: 
                  0.00% 
               
             
          
           
               
                 INFLATION RATE (1): 
                 5.00% 
                 BANK INFORMATION 
               
             
          
           
               
                 TTH ARRANGEMENT FEE: 
                 1.00% 
                 MARGINAL TAX RATE: 
                  0.00% 
               
               
                 TTH ANNUAL SERVICE FEE: 
                 1.00% 
                 DIVIDEND PAYOUT RATIO: 
                  0.00% 
               
               
                   
               
             
          
           
               
                   
                 BALANCE SHEET 
                 CASH FLOWS 
                 RATIOS 
               
             
          
           
               
                   
                 AB DEPOSIT 
                 LOAN 
                 NET 
                 INTEREST 
                 AB DEPOSIT 
                 NET CASH 
                 NET 
                 RETURN ON 
                 CAPITAL TO 
               
               
                 YEAR 
                 BALANCE 
                 BALANCE 
                 WORTH (2) 
                 INCOME (3) 
                 SERVICE 
                 FLOW (3) 
                 INCOME (2) 
                 AVG ASSETS 
                 ASSET RATIO 
               
               
                   
               
               
                 0 
                 $100.000 
                 $99.000 
                   
                   
                   
                   
                   
                   
                   
               
               
                 1 
                 103.063 
                 103.182 
                  $0.119 
                 $10.910  
                 $6.468 
                 $4.442 
                 $1.119 
                 1.11% 
                 0.12% 
               
               
                 2 
                 106.109 
                 107.519 
                 1.410 
                 11.371 
                 6.775 
                 4.596 
                 1.291 
                 1.23 
                 1.31 
               
               
                 3 
                 109.122 
                 112.014 
                 2.892 
                 11.849 
                 7.097 
                 4.752 
                 1.482 
                 1.35 
                 2.58 
               
               
                 4 
                 112.084 
                 116.673 
                 4.589 
                 12.344 
                 7.434 
                 4.911 
                 1.696 
                 1.48 
                 3.93 
               
               
                 5 
                 114.976 
                 121.499 
                 6.524 
                 12.858 
                 7.786 
                 5.072 
                 1.935 
                 1.62 
                 5.37 
               
               
                 6 
                 117.773 
                 126.497 
                 8.725 
                 13.390 
                 8.154 
                 5.236 
                 2.201 
                 1.78 
                 6.90 
               
               
                 7 
                 120.449 
                 131.672 
                 11.223 
                 13.940 
                 8.539 
                 5.402 
                 2.498 
                 1.93 
                 8.52 
               
               
                 8 
                 122.976 
                 137.027 
                 14.051 
                 14.511 
                 8.941 
                 5.570 
                 2.828 
                 2.10 
                 10.25 
               
               
                 9 
                 125.321 
                 142.567 
                 17.246 
                 15.101 
                 9.361 
                 5.740 
                 3.195 
                 2.29 
                 12.10 
               
               
                 10 
                 127.447 
                 148.297 
                 20.850 
                 15.711 
                 9.801 
                 5.910 
                 3.604 
                 2.48 
                 14.06 
               
               
                 11 
                 129.313 
                 154.221 
                 24.908 
                 16.343 
                 10.260 
                 6.082 
                 4.058 
                 2.68 
                 16.15 
               
               
                 12 
                 130.872 
                 160.343 
                 29.471 
                 16.996 
                 10.741 
                 6.255 
                 4.563 
                 2.90 
                 18.38 
               
               
                 13 
                 132.074 
                 166.668 
                 34.594 
                 17.670 
                 11.243 
                 6.427 
                 5.123 
                 3.13 
                 20.76 
               
               
                 14 
                 132.861 
                 173.200 
                 40.340 
                 18.367 
                 11.768 
                 6.599 
                 5.746 
                 3.38 
                 23.29 
               
               
                 15 
                 133.168 
                 179.944 
                 46.776 
                 19.087 
                 12.317 
                 6.770 
                 6.436 
                 3.65 
                 25.99 
               
               
                 16 
                 132.925 
                 186.904 
                 53.978 
                 19.830 
                 12.892 
                 6.939 
                 7.203 
                 3.93 
                 28.88 
               
               
                 17 
                 132.052 
                 194.083 
                 62.031 
                 20.597 
                 13.493 
                 7.105 
                 8.053 
                 4.23 
                 31.96 
               
               
                 18 
                 130.459 
                 201.485 
                 71.026 
                 21.389 
                 14.122 
                 7.267 
                 8.995 
                 4.55 
                 35.25 
               
               
                 19 
                 128.048 
                 209.114 
                 81.066 
                 22.204 
                 14.781 
                 7.423 
                 10.040 
                 4.89 
                 38.77 
               
               
                 20 
                 124.707 
                 216.970 
                 92.264 
                 23.045 
                 15.472 
                 7.573 
                 11.198 
                 5.26 
                 42.52 
               
               
                 21 
                 120.312 
                 225.057 
                 104.745 
                 23.911 
                 16.198 
                 7.713 
                 12.481 
                 5.65 
                 46.54 
               
               
                 22 
                 114.724 
                 233.372 
                 118.648 
                 24.802 
                 16.962 
                 7.840 
                 13.903 
                 6.07 
                 50.84 
               
               
                 23 
                 107.786 
                 241.913 
                 134.127 
                 25.718 
                 17.768 
                 7.951 
                 15.479 
                 6.51 
                 55.44 
               
               
                 24 
                 99.320 
                 250.671 
                 151.351 
                 26.660 
                 18.621 
                 8.039 
                 17.224 
                 6.99 
                 60.38 
               
               
                 25 
                 89.123 
                 259.632 
                 170.509 
                 27.625 
                 19.530 
                 8.094 
                 19.158 
                 7.51 
                 65.67 
               
               
                 26 
                 76.959 
                 268.770 
                 191.811 
                 28.612 
                 20.509 
                 8.104 
                 21.301 
                 8.06 
                 71.37 
               
               
                 27 
                 62.549 
                 276.036 
                 215.488 
                 29.619 
                 21.576 
                 8.042 
                 25.677 
                 8.66 
                 77.50 
               
               
                 28 
                 45.539 
                 287.342 
                 241.802 
                 30.641 
                 22.781 
                 7.859 
                 26.314 
                 9.31 
                 84.15 
               
               
                 29 
                 25.438 
                 296.490 
                 271.051 
                 31.666 
                 24.226 
                 7.440 
                 29.249 
                 10.02 
                 91.42 
               
               
                 30 
                 1.272 
                 304.877 
                 303.605 
                 32.674 
                 26.341 
                 6.333 
                 32.553 
                 10.83 
                 99.58 
               
               
                   
               
               
                 (1) THESE RATES ARE TREATED AS CONSTANTS; HOWEVER, IF INFLATION INCREASES LENDING RATES ALSO RISE. 
               
               
                 (2) THE NET WORTH AND INCOME COLUMNS ARE NET OF LOAN ORIGINATION AND SERVICING COSTS, FEES, TAXES AND DIVIDENDS AT THE STATED RATES. 
               
               
                 (3) PRINCIPAL REPAYMENTS ARE PRESUMED TO BE REINVESTED AND THEREFORE ARE EXCLUDED FROM THE CASH FLOW ANALYSIS. 
               
             
          
         
       
     
     
       
         
               
               
               
               
             
               
               
               
             
               
               
               
               
             
               
               
               
               
             
               
               
               
               
               
               
               
               
               
               
             
           
               
                 TABLE IV 
               
               
                   
               
             
             
               
                 INITIAL DEPOSIT: 
                 $100 
                 TERM &amp; AMORTIZATION: 
                 OPTIONAL 
               
               
                 TERM (years): 
                 30 
                 LOAN &amp; REINVESTMENT RATE (1): 
                 11.50% 
               
               
                 REAL INTEREST RATE: 
                 3.50% 
                 ORIGINATION FEE: 
                  0.00% 
               
             
          
           
               
                 INFLATION RATE (1): 
                 5.00% 
                 BANK INFORMATION 
               
             
          
           
               
                 TTH ARRANGEMENT FEE: 
                 1.00% 
                 MARGINAL TAX RATE: 
                  0.00% 
               
               
                 TTM ANNUAL SERVICE FEE: 
                 1.00% 
                 DIVIDEND PAYOUT RATIO: 
                  0.00% 
               
               
                   
               
             
          
           
               
                   
                 BALANCE SHEET 
                 CASH FLOWS 
                 RATIOS 
               
             
          
           
               
                   
                 AB DEPOSIT 
                 LOAN 
                 NET 
                 INTEREST 
                 AB DEPOSIT 
                 NET CASH 
                 NET 
                 RETURN ON 
                 CAPITAL TO 
               
               
                 YEAR 
                 BALANCE 
                 BALANCE 
                 WORTH (2) 
                 INCOME (3) 
                 SERVICE 
                 FLOW (3) 
                 INCOME (2) 
                 AVG ASSETS 
                 ASSET RATIO 
               
               
                   
               
               
                 0 
                 $100.000 
                 $99.000 
                   
                   
                   
                   
                   
                   
                   
               
               
                 1 
                 103.063 
                 104.277 
                  $1.214 
                 $12.005 
                 $6.468 
                 $5.537 
                 $2.214 
                 2.18% 
                 1.16% 
               
               
                 2 
                 106.109 
                 109.887 
                 3.778 
                 12.645 
                 6.775 
                 5.869 
                 2.564 
                 2.39 
                 3.44 
               
               
                 3 
                 109.122 
                 115.858 
                 6.736 
                 13.325 
                 7.097 
                 6.228 
                 2.958 
                 2.62 
                 5.81 
               
               
                 4 
                 112.084 
                 122.221 
                 10.137 
                 14.049 
                 7.434 
                 6.615 
                 3.401 
                 2.86 
                 8.29 
               
               
                 5 
                 114.976 
                 129.010 
                 14.035 
                 14.820 
                 7.786 
                 7.035 
                 3.898 
                 3.10 
                 10.88 
               
               
                 6 
                 117.773 
                 136.263 
                 18.490 
                 15.644 
                 8.154 
                 7.490 
                 4.455 
                 3.36 
                 13.57 
               
               
                 7 
                 120.449 
                 144.020 
                 23.570 
                 16.523 
                 8.539 
                 7.985 
                 5.080 
                 3.63 
                 16.37 
               
               
                 8 
                 122.976 
                 152.328 
                 29.351 
                 17.464 
                 8.941 
                 8.523 
                 5.781 
                 3.90 
                 19.27 
               
               
                 9 
                 125.321 
                 161.238 
                 35.917 
                 18.471 
                 9.361 
                 9.110 
                 6.566 
                 4.19 
                 22.28 
               
               
                 10 
                 127.447 
                 170.808 
                 43.361 
                 19.552 
                 9.801 
                 9.751 
                 7.444 
                 4.48 
                 25.39 
               
               
                 11 
                 129.313 
                 181.101 
                 51.789 
                 20.712 
                 10.260 
                 10.452 
                 8.427 
                 4.79 
                 28.60 
               
               
                 12 
                 130.872 
                 192.188 
                 61.316 
                 21.960 
                 10.741 
                 11.219 
                 9.527 
                 5.10 
                 31.90 
               
               
                 13 
                 132.074 
                 204.148 
                 72.074 
                 23.305 
                 11.243 
                 12.062 
                 10.758 
                 5.43 
                 35.30 
               
               
                 14 
                 132.861 
                 217.067 
                 84.207 
                 24.755 
                 11.768 
                 12.987 
                 12.133 
                 5.76 
                 38.79 
               
               
                 15 
                 133.168 
                 231.046 
                 97.877 
                 26.321 
                 12.317 
                 14.004 
                 13.670 
                 6.10 
                 42.36 
               
               
                 16 
                 132.925 
                 246.191 
                 113.266 
                 28.016 
                 12.892 
                 15.125 
                 15.389 
                 6.45 
                 46.01 
               
               
                 17 
                 132.052 
                 262.626 
                 130.574 
                 29.853 
                 13.493 
                 16.360 
                 17.308 
                 6.80 
                 49.72 
               
               
                 18 
                 130.459 
                 280.485 
                 150.026 
                 31.846 
                 14.122 
                 17.724 
                 19.452 
                 7.16 
                 53.49 
               
               
                 19 
                 128.048 
                 299.921 
                 171.873 
                 34.011 
                 14.781 
                 19.231 
                 21.847 
                 7.53 
                 57.31 
               
               
                 20 
                 124.707 
                 321.101 
                 196.394 
                 36.368 
                 15.472 
                 20.896 
                 24.521 
                 7.90 
                 61.16 
               
               
                 21 
                 120.312 
                 344.212 
                 223.900 
                 38.936 
                 16.198 
                 22.738 
                 27.507 
                 8.27 
                 65.05 
               
               
                 22 
                 114.724 
                 369.465 
                 254.741 
                 41.739 
                 16.962 
                 24.777 
                 30.840 
                 8.64 
                 68.95 
               
               
                 23 
                 107.786 
                 397.088 
                 289.302 
                 44.801 
                 17.768 
                 27.034 
                 34.561 
                 9.02 
                 72.86 
               
               
                 24 
                 99.320 
                 427.337 
                 328.017 
                 48.151 
                 18.621 
                 29.530 
                 38.715 
                 9.39 
                 76.76 
               
               
                 25 
                 89.123 
                 460.492 
                 371.369 
                 51.819 
                 19.530 
                 32.288 
                 43.352 
                 9.77 
                 80.65 
               
               
                 26 
                 76.959 
                 496.856 
                 419.897 
                 55.839 
                 20.509 
                 35.330 
                 48.528 
                 10.14 
                 84.51 
               
               
                 27 
                 62.549 
                 536.752 
                 474.203 
                 60.248 
                 21.578 
                 38.671 
                 54.306 
                 10.51 
                 88.35 
               
               
                 28 
                 45.539 
                 580.503 
                 534.963 
                 65.086 
                 22.781 
                 42.305 
                 60.760 
                 10.88 
                 92.16 
               
               
                 29 
                 25.438 
                 628.376 
                 602.938 
                 70.391 
                 24.226 
                 46.165 
                 67.975 
                 11.25 
                 95.95 
               
               
                 30 
                 1.272 
                 680.286 
                 679.014 
                 76.197 
                 26.341 
                 49.855 
                 76.076 
                 11.63 
                 99.81 
               
               
                   
               
               
                 (1) THESE RATES ARE TREATED AS CONSTANTS; HOWEVER, IF INFLATION INCREASES LENDING RATES ALSO RISE. 
               
               
                 (2) THE NET WORTH AND INCOME COLUMNS ARE NET OF LOAN ORIGINATION AND SERVICING COSTS, FEES, TAXES AND DIVIDENDS AT THE STATED RATES. 
               
               
                 (3) PRINCIPAL REPAYMENTS ARE PRESUMED TO BE REINVESTED AND THEREFORE ARE EXCLUDED FROM THE CASH FLOW ANALYSIS. 
               
             
          
         
       
     
                                                                                                                             TABLE V                   INITIAL DEPOSIT:   $100   TERM &amp; AMORTIZATION:   OPTIONAL       TERM (years):   30   LOAN &amp; REINVESTMENT RATE (1):   12.50%       REAL INTEREST RATE:   3.50%   ORIGINATION FEE:    0.00%            INFLATION RATE (1):   5.00%   BANK INFORMATION            TTH ARRANGEMENT FEE:   1.00%   MARGINAL TAX RATE:    0.00%       TTH ANNUAL SERVICE FEE:   1.00%   DIVIDEND PAYOUT RATIO:    0.00%                        BALANCE SHEET   CASH FLOWS   RATIOS                AB DEPOSIT   LOAN   NET   INTEREST   AB DEPOSIT   NET CASH   NET   RETURN ON   CAPITAL TO       YEAR   BALANCE   BALANCE   WORTH (2)   INCOME (3)   SERVICE   FLOW (3)   INCOME (2)   AVG ASSETS   ASSET RATIO               0   $100.000    $99.000                                   1   103.063   105.381    $2.318   $13.109   $6.468    $6.641    $3.318   3.25%   2.20%       2   106.109   112.301   6.192   13.954   6.775   7.179   3.874   3.56   5.51       3   109.122   119.818   10.696   14.870   7.097   7.773   4.504   3.88   8.93       4   112.084   127.998   15.914   15.866   7.434   8.432   5.218   4.21   12.43       5   114.976   136.916   21.940   16.949   7.786   9.163   6.026   4.55   16.02       6   117.773   146.654   28.881   18.130   8.154   9.976   6.941   4.90   19.69       7   120.449   157.307   36.858   19.419   8.539   10.881   7.977   5.25   23.43       8   122.976   168.982   46.005   20.830   8.941   11.889   9.147   5.61   27.23       9   125.321   181.797   56.476   22.376   9.361   13.015   10.470   5.97   31.07       10   127.447   195.888   68.441   24.073   9.801   14.272   11.965   6.34   34.94       11   129.313   211.408   82.095   25.939   10.260   15.678   13.654   6.70   38.83       12   130.872   228.528   97.656   27.994   10.741   17.253   15.561   7.07   42.73       13   132.074   247.444   115.370   30.261   11.243   19.018   17.714   7.44   46.62       14   132.861   268.374   135.514   32.766   11.768   20.997   20.144   7.81   50.49       15   133.168   291.568   158.400   35.537   12.317   23.220   22.886   8.17   54.33       16   132.925   317.305   184.380   38.608   12.892   25.717   25.980   8.53   58.11       17   132.052   345.903   213.851   42.016   13.493   28.524   29.471   8.89   61.82       18   130.459   377.720   247.261   45.803   14.122   31.681   33.410   9.23   65.46       19   128.048   413.160   285.113   50.016   14.781   35.235   37.852   9.57   69.01       20   124.707   452.681   327.974   54.709   15.472   39.237   42.862   9.90   72.45       21   120.312   496.799   376.487   59.942   16.198   43.744   48.513   10.22   75.78       22   114.724   546.096   431.372   65.784   16.962   48.822   54.885   10.53   78.99       23   107.786   601.231   493.445   72.312   17.768   54.544   62.072   10.82   82.07       24   99.320   662.942   563.622   79.613   18.621   60.992   70.177   11.10   85.02       25   89.123   732.062   642.939   87.784   19.530   68.254   79.317   11.37   87.83       26   76.959   809.524   737.565   96.937   20.509   76.428   89.626   11.63   90.49       27   62.549   896.365   833.817   107.194   21.578   85.616   101.252   11.87   93.02       28   45.539   993.723   948.184   118.693   22.781   95.912   114.367   12.10   95.42       29   25.438   1102.790   1077.352   131.585   24.226   107.359   129.168   12.32   97.69       30   1.272   1224.530   1223.258   146.027   26.341   119.686   145.906   12.54   99.90               (1) THESE RATES ARE TREATED AS CONSTANTS; HOWEVER, IF INFLATION INCREASES LENDING RATES ALSO RISE.       (2) THE NET WORTH AND INCOME COLUMNS ARE NET OF LOAN ORIGINATION AND SERVICING COSTS, FEES, TAXES AND DIVIDENDS AT THE STATED RATES.       (3) PRINCIPAL REPAYMENTS ARE PRESUMED TO BE REINVESTED AND THEREFORE ARE EXCLUDED FROM THE CASH FLOW ANALYSIS.            
inflation rates do tend to lower interest rates but not quite one for one, as skeptical lenders demand inflation risk premiums against the possibility of renewed future inflation.
 
     If deflation were actually to occur the inflation-adjusted Group IV deposit account still calls for interest payments based on the fixed amortization rate and deflation results in credits which carry forward to offset future inflation interest. While the deposit rate at a minimum is equal to the fixed amortization rate of 3.5%, loan rates should be sufficient to cover the fixed amortization rate. 
     Example III 
     The Fully-Hedged Program 
     a. Hedging the Interest Rate Risk 
     It is possible to fully hedge the inflation interest cost by lending funds received by the intermediary in deposit accounts on an inflation-adjusting loan rate basis. An intermediary could, for example, make funds available to corporate borrowers for medium-term corporate needs of between 3 and 10 years. The present invention provides an inflation-adjusting loan account similar in structure to the inflation-adjusted deposit but, preferrably, with a shorter maturity. Again, the lengthy deferrals on the deposit and the shorter repayment schedules on the loan allows the intermediary bank to capitalize on the time value of the more rapid principal repayment on the assets than is needed to service the liabilities. The return on assets is magnified by these deferrals. 
     Such hedging would eliminate real interest rate risk during the term of the account having the shortest maturity, but would not achieve a “matched” asset and liability balance for the intermediary. This variation of the hedged program is not fully matched because there are dissimilar terms to maturity of the loan accounts as compared to the deposit accounts. Thus, when the term of both accounts are dissimilar, some degree of risk will still be present for the intermediary. This is because upon renewal of the account having the shorter term, a variation in fixed or “real” interest rates may have developed in the market. And potentially, the intermediary could find itself with unbalanced cash flows. The different terms would also leave the intermediary with an unmatched balance sheet. However, it may nevertheless be desirable for intermediaries to hedge inflation-adjusted loan and deposit accounts without fully matching terms because certain intermediaries may be unable to solicit sufficient numbers of long-term loan accounts with adequate underwriting characteristics to satisfy a fully matched program. 
     b. The Fully Hedged “Matched” Program 
     It is also possible to exactly match the inflation-adjusting deposit with an inflation-adjusting loan of equal maturity which would totally reduce the financial risk from variable inflation rates and yield curve inversions. In this case, the intermediary would be servicing long-term loans, most likely to finance real estate or other durable plant and equipment. With similar maturities of both the loan and deposit accounts, the intermediary can earn a constant spread over its cost of money with matching deposit and loan contracts. This would fully hedge the real interest rate risk. These loans would also generate substantial front end fees for the intermediary. 
     Table VI illustrates the effect on the balance sheet and cash flow of an intermediary when the intermediary takes the excess cash flow generated by the matched accounts and reinvests this in new loan accounts with similar terms to the original account. In contrast to Table III, there are generally origination fees associated with such long term loans, which would be equal to the arrangement fees charged by the organizer. It can be observed in Table VI that the total net worth generated by such a fully matched program would be more advantageous to the intermediary than the total net worth generated by a situation such as depicted in Table III, in spite of the fact that receipts by the intermediary would be substantially lower in the initial years than those generated by the partially hedged programs. 
     Again, in contrast to the situation of a partially hedged program, the exact match between the loan and the deposit account results in identical net cash flow and net income, without the need to rely upon the current tax code in order to generate an additional advantage to the intermediary. The fully matched program will also have in effect a higher initial return on average assets. It should be pointed out that Table VI assumes that the income from the loan accounts flows into the intermediary on a monthly basis and the payments due the deposit account holder must be made on a yearly basis. In this period of time, the intermediary has had the opportunity to invest these funds at the stated float investment rate. 
     Table VII shows the situation under a fully hedged matched program wherein the loan account and deposit account both have an initial balance of $100 and a term of 30 years. In Table VII, no assumption is made regarding any reinvestment by the intermediary of the income obtained from the loan account. Rather, it demonstrates what the yearly income to the intermediary would be before covering the annual service fee to the organizer under the column titled Spread Retained. Both the loan and deposit accounts have identical values throughout the term of the accounts. These values are shown under the column titled Adjusted Principal. The cash income generated to the intermediary is shown in Table VII under the column titled ABML Payments. This income has two components: the principal payment and the interest payment. The interest payment in turn is split into the portion of interest that is passed through to the deposit account holder and the portion that is retained by the intermediary institution shown under the column titled Spread Retained. 
     The advantages of such a loan program to the intermediary are further depicted in Table VII in the remaining column, where in this case an assumption has been made that a property with a market value of $125 is financed by the loan account, and the loan granted by the intermediary represents 80% of the value of such a property. Table VII further makes an assumption that the property increases in value over time in direct proportion to inflation and as a result if such a property generated operating net income before debt service at a rate of 9.5% of its value such operating income would increase over time also in direct proportion to inflation. 
     The next column of Table VII titled Loan to Value Ratio shows how each year the principal repayment which takes place reduces the loan to value ratio from the initial 80% to levels of 60% by year 11, 40% by year 19, 21% by year 25 and essentially 0 by the end of the 30th year. The debt coverage ratio which is calculated by dividing the net operating income of a property by the payments due for debt service thereon is much higher than that consistently found in such loans by those skilled in the art, with a resulting value of 1.49 in the first year whereas the industry standards usually range between 1.0 and 1.2. 
     To further emphasize the advantages to the intermediaries, it should be pointed out that this debt coverage ratio of 1.49 is improved in subsequent years to levels of 1.55 by year 14, 1.64 by year 21, 1.75 by year 27, etc. The last column shows that in terms of “constant dollars,” the payments made by the borrower to service the loan over time are actually reduced from an initial 7.55 to a level of 6.2 by the 30th year. As the present invention demonstrates, the income paid to the deposit holder maintains a constant purchasing power, and yet in terms of constant purchasing power the stream of payments that must be made by the borrower decreases over time. 
     Tables VIII and IX show the behavior of the loan to value of ratios and debt coverage ratios over time when the property financed by the loan account cannot maintain its value at the same pace as prices increase. Table VIII presents the case of the property appreciating at a rate of 1% less than the rate of inflation. In this case, the loan to value ratio is also constantly reduced and the debt coverage ratio no longer shows a continuous improvement over time but nevertheless reaches a minimum value of 1.32 in the last year. Yet this is substantially higher than the norm found in the industry. Table IX shows the case where the property fails to keep up with the rate of inflation by 2% per annum. In this case, the loan to value rate will initially show a slight increase and thereafter decreases although at a slower pace. The debt coverage ratio in this case decreases at a faster 
     
       
         
               
               
             
               
               
               
               
             
               
               
               
             
               
               
               
               
             
               
               
               
               
             
               
               
               
               
               
               
               
               
               
               
             
           
               
                 TABLE VI 
               
               
                   
               
             
             
               
                 AB DEPOSIT INFORMATION 
                 LOAN INFORMATION 
               
             
          
           
               
                 INITIAL DEPOSIT: 
                 $100 
                 TERM &amp; AMORTIZATION: 
                 30 
               
               
                 TERM (years): 
                 30 
                 CONSTANT INTEREST RATE: 
                  2.50% 
               
               
                 REAL INTEREST RATE: 
                 3.50% 
                 ORIGINATION FEE: 
                  2.00% 
               
               
                 INFLATION RATE: 
                 5.00% 
                 FLOAT INVESTMENT NOMINAL RATE (1): 
                 10.00% 
               
             
          
           
               
                 TTH ARRANGEMENT FEE:* 
                 2.00% 
                 S &amp; L INFORMATION 
               
             
          
           
               
                 TTH ANNUAL SERVICE FEE: 
                 1.00% 
                 MARGINAL TAX RATE: 
                  0.00% 
               
               
                   
                   
                 DIVIDEND PAYOUT RATIO: 
                  0.00% 
               
               
                   
               
             
          
           
               
                   
                 BALANCE SHEET 
                 CASH FLOWS 
                 RATIOS 
               
             
          
           
               
                   
                 AB DEPOSIT 
                 LOAN 
                 NET 
                 ABML 
                 AB DEPOSIT 
                 NET CASH 
                 NET 
                 RETURN ON 
                 CAPITAL TO 
               
               
                 YEAR 
                 BALANCE 
                 BALANCE 
                 WORTH (2) 
                 PMTS 
                 SERVICE 
                 FLOW 
                 INCOME (2) 
                 AVG ASSETS 
                 ASSET RATIO 
               
               
                   
               
               
                 0 
                 $100.000 
                 $100.000 
                   
                   
                   
                   
                   
                   
                   
               
               
                 1 
                 103.063 
                 104.976 
                  $1.913 
                 8.351 
                 6.437 
                 $1.913 
                 1.913 
                 1.87% 
                 1.82% 
               
               
                 2 
                 106.109 
                 110.160 
                 4.051 
                 8.883 
                 6.745 
                 2.138 
                 2.138 
                 1.99 
                 3.68 
               
               
                 3 
                 109.122 
                 115.561 
                 6.439 
                 9.455 
                 7.067 
                 2.388 
                 2.388 
                 2.12 
                 5.57 
               
               
                 4 
                 112.084 
                 121.191 
                 9.107 
                 10.072 
                 7.404 
                 2.668 
                 2.668 
                 2.25 
                 7.51 
               
               
                 5 
                 114.976 
                 127.063 
                 12.087 
                 10.737 
                 7.757 
                 2.981 
                 2.981 
                 2.40 
                 9.51 
               
               
                 6 
                 117.773 
                 133.190 
                 15.418 
                 11.456 
                 8.126 
                 3.330 
                 3.330 
                 2.56 
                 11.58 
               
               
                 7 
                 120.449 
                 139.588 
                 19.138 
                 12.232 
                 8.512 
                 3.721 
                 3.721 
                 2.73 
                 13.71 
               
               
                 8 
                 122.976 
                 146.272 
                 23.296 
                 13.073 
                 8.916 
                 4.157 
                 4.157 
                 2.91 
                 15.93 
               
               
                 9 
                 125.321 
                 153.262 
                 27.941 
                 13.983 
                 9.338 
                 4.645 
                 4.645 
                 3.10 
                 18.23 
               
               
                 10 
                 127.447 
                 160.578 
                 33.131 
                 14.970 
                 9.780 
                 5.190 
                 5.190 
                 3.31 
                 20.63 
               
               
                 11 
                 129.313 
                 168.243 
                 38.930 
                 16.041 
                 10.242 
                 5.800 
                 5.800 
                 3.53 
                 23.14 
               
               
                 12 
                 130.872 
                 176.283 
                 45.411 
                 17.206 
                 10.725 
                 6.481 
                 6.481 
                 3.76 
                 25.76 
               
               
                 13 
                 132.074 
                 184.727 
                 52.653 
                 18.473 
                 11.231 
                 7.242 
                 7.242 
                 4.01 
                 28.50 
               
               
                 14 
                 132.861 
                 193.606 
                 60.745 
                 19.853 
                 11.760 
                 8.093 
                 8.093 
                 4.28 
                 31.38 
               
               
                 15 
                 133.168 
                 202.957 
                 69.789 
                 21.358 
                 12.314 
                 9.044 
                 9.044 
                 4.56 
                 34.39 
               
               
                 16 
                 132.925 
                 212.821 
                 79.896 
                 23.001 
                 12.894 
                 10.107 
                 10.107 
                 4.86 
                 37.54 
               
               
                 17 
                 132.052 
                 223.243 
                 91.191 
                 24.796 
                 13.501 
                 11.295 
                 11.295 
                 5.18 
                 40.85 
               
               
                 18 
                 130.459 
                 234.274 
                 103.815 
                 26.761 
                 14.138 
                 12.624 
                 12.624 
                 5.52 
                 44.31 
               
               
                 19 
                 128.048 
                 245.971 
                 117.923 
                 28.914 
                 14.805 
                 14.109 
                 14.109 
                 5.88 
                 47.94 
               
               
                 20 
                 124.707 
                 258.400 
                 133.693 
                 31.275 
                 15.506 
                 15.769 
                 15.769 
                 6.25 
                 51.74 
               
               
                 21 
                 120.312 
                 271.631 
                 151.319 
                 33.868 
                 16.242 
                 17.626 
                 17.626 
                 6.65 
                 55.71 
               
               
                 22 
                 114.724 
                 285.745 
                 171.021 
                 36.720 
                 17.018 
                 19.702 
                 19.702 
                 7.07 
                 59.85 
               
               
                 23 
                 107.786 
                 300.830 
                 193.044 
                 39.860 
                 17.837 
                 22.023 
                 22.023 
                 7.51 
                 64.17 
               
               
                 24 
                 99.320 
                 316.983 
                 217.663 
                 43.325 
                 18.706 
                 24.619 
                 24.619 
                 7.97 
                 68.67 
               
               
                 25 
                 89.123 
                 334.349 
                 245.187 
                 47.156 
                 19.632 
                 27.523 
                 27.523 
                 8.45 
                 73.34 
               
               
                 26 
                 76.959 
                 352.918 
                 275.958 
                 51.402 
                 20.630 
                 30.772 
                 30.772 
                 8.96 
                 78.19 
               
               
                 27 
                 62.549 
                 372.914 
                 310.365 
                 56.129 
                 21.722 
                 34.407 
                 34.407 
                 9.48 
                 83.23 
               
               
                 28 
                 45.539 
                 394.381 
                 348.842 
                 61.428 
                 22.951 
                 38.477 
                 38.477 
                 10.03 
                 88.45 
               
               
                 29 
                 25.438 
                 417.319 
                 391.881 
                 67.466 
                 24.427 
                 43.039 
                 43.039 
                 10.60 
                 93.90 
               
               
                 30 
                 1.272 
                 441.327 
                 440.055 
                 74.758 
                 26.583 
                 48.175 
                 48.175 
                 11.22 
                 99.71 
               
               
                   
               
               
                 (1) THIIS RATE IS TREATED AS A CONSTANT; HOWEVER, IF INFLATION INCREASES FLOAT INVESTMENT RATE ALSO RISES. 
               
               
                 (2) THE NET WORTH AND INCOME COLUMNS ARE NET OF LOAN ORIGINATION AND SERVICING COSTS, FEES, TAXES AND DIVIDENDS AT THE STATED RATE 
               
               
                 *THE ARRANGEMENT FEE WOULD EQUAL THE ORIGINATION FEE 
               
             
          
         
       
     
     
       
         
               
               
               
               
               
               
             
               
             
               
               
               
               
               
               
               
               
               
               
               
               
             
           
               
                 TABLE VII 
               
               
                   
               
             
             
               
                 LOAN AMOUNT: 
                 $100.00 
                 BUILDING VALUE: 
                 $125.00 
                 BUILDING ROR: 
                 9.50% 
               
               
                 TERM IN YEARS: 
                 30 
                 INFLATION: 
                 5.00% 
                 SPREAD: 
                 2.50% 
               
               
                 INTEREST RATE: 
                 3.50% 
                 APPRECIATION RATE: 
                 5.00% 
               
               
                   
               
             
          
           
               
                 ANALYSIS FOR DEPOSITORY INSTITUTION: 
               
             
          
           
               
                   
                   
                 PRIN- 
                 IN- 
                 IN- 
                   
                 AD- 
                   
                   
                   
                   
                   
               
               
                   
                   
                 CIPAL  
                 TEREST 
                 TEREST 
                 SPREAD 
                 JUSTED 
                 BUILD- 
                   
                 BUILD- 
                 DEBT 
                 REAL 
               
               
                   
                 ABML 
                 PAY- 
                 PAY- 
                 PASS- 
                 RE- 
                 PRIN- 
                 ING 
                 L/V 
                 ING 
                 COV- 
                 PAY- 
               
               
                 YEAR 
                 PMTS 
                 MENT 
                 MENT 
                 THROUG  
                 TAINED 
                 CIPAL 
                 VALUE 
                 RATIO 
                 INCOME 
                 ERAGE 
                 MENT 
               
               
                   
               
               
                 0 
                   
                   
                   
                   
                   
                 100.0000 
                 125.0000 
                   
                   
                   
                   
               
               
                 1 
                 7.9371 
                 1.9371 
                 6.0000 
                 3.5000 
                 2.5000 
                 103.0629 
                 131.2500 
                 0.7852 
                 11.8750 
                 1.4961 
                 7.5592 
               
               
                 2 
                 8.2909 
                 2.1072 
                 6.1838 
                 3.6072 
                 2.5766 
                 106.1089 
                 137.8125 
                 0.7700 
                 12.4688 
                 1.4323 
                 7.5201 
               
               
                 3 
                 8.6588 
                 2.2922 
                 6.3665 
                 3.7138 
                 2.6527 
                 109.1221 
                 144.7031 
                 0.7541 
                 13.0922 
                 1.4400 
                 7.4798 
               
               
                 4 
                 9.0410 
                 2.4937 
                 6.5473 
                 3.8193 
                 2.7281 
                 112.0845 
                 151.9383 
                 0.7377 
                 13.7468 
                 1.4481 
                 7.4381 
               
               
                 5 
                 9.4381 
                 2.7130 
                 6.7251 
                 3.9230 
                 2.8021 
                 114.9756 
                 159.5352 
                 0.7207 
                 14.4341 
                 1.4565 
                 7.3950 
               
               
                 6 
                 9.8504 
                 2.9519 
                 6.8985 
                 4.0241 
                 2.8744 
                 117.7725 
                 167.5120 
                 0.7031 
                 15.1558 
                 1.4653 
                 7.3505 
               
               
                 7 
                 10.2783 
                 3.2120 
                 7.0664 
                 4.1220 
                 2.9443 
                 120.4492 
                 175.8876 
                 0.6848 
                 15.9136 
                 1.4745 
                 7.3046 
               
               
                 8 
                 10.7222 
                 3.4953 
                 7.2269 
                 4.2157 
                 3.0112 
                 122.9763 
                 184.6819 
                 0.6659 
                 16.7093 
                 1.4842 
                 7.2572 
               
               
                 9 
                 11.1825 
                 3.8039 
                 7.3786 
                 4.3042 
                 3.0744 
                 125.3212 
                 193.9160 
                 0.6463 
                 17.5448 
                 1.4942 
                 7.2083 
               
               
                 10 
                 11.6595 
                 4.1402 
                 7.5193 
                 4.3862 
                 3.1330 
                 127.4471 
                 203.6118 
                 0.6259 
                 18.4220 
                 1.5048 
                 7.1579 
               
               
                 11 
                 12.1535 
                 4.5067 
                 7.6468 
                 4.4606 
                 3.1862 
                 129.3128 
                 213.7924 
                 0.6049 
                 19.3431 
                 1.5158 
                 7.1059 
               
               
                 12 
                 12.6649 
                 4.9062 
                 7.7588 
                 4.5259 
                 3.2328 
                 130.8723 
                 224.4820 
                 0.5830 
                 20.3103 
                 1.5273 
                 7.0523 
               
               
                 13 
                 13.1941 
                 5.3418 
                 7.8523 
                 4.5805 
                 3.2718 
                 132.0741 
                 235.7061 
                 0.5603 
                 21.3258 
                 1.5393 
                 6.9971 
               
               
                 14 
                 13.7414 
                 5.8170 
                 7.9244 
                 4.6226 
                 3.3019 
                 132.8608 
                 247.4914 
                 0.5368 
                 22.3921 
                 1.5519 
                 6.9403 
               
               
                 15 
                 14.3071 
                 6.3354 
                 7.9717 
                 4.6501 
                 3.3215 
                 133.1684 
                 259.8660 
                 0.5125 
                 23.5117 
                 1.5651 
                 6.8820 
               
               
                 16 
                 14.8916 
                 6.9015 
                 7.9901 
                 4.6609 
                 3.3292 
                 132.9254 
                 272.8593 
                 0.4872 
                 24.6873 
                 1.5789 
                 6.8220 
               
               
                 17 
                 15.4952 
                 7.5197 
                 7.9755 
                 4.6524 
                 3.3231 
                 132.0520 
                 286.5023 
                 0.4609 
                 25.9216 
                 1.5932 
                 6.7605 
               
               
                 18 
                 16.1185 
                 8.1954 
                 7.9231 
                 4.6218 
                 3.3013 
                 130.4592 
                 300.8274 
                 0.4337 
                 27.2177 
                 1.6082 
                 6.6976 
               
               
                 19 
                 16.7619 
                 8.9344 
                 7.8276 
                 4.5661 
                 3.2615 
                 128.0478 
                 315.8688 
                 0.4054 
                 28.5786 
                 1.6238 
                 6.6333 
               
               
                 20 
                 17.4263 
                 9.7434 
                 7.6829 
                 4.4817 
                 3.2012 
                 124.7068 
                 331.6622 
                 0.3760 
                 30.0075 
                 1.6400 
                 6.5678 
               
               
                 21 
                 18.1126 
                 10.6302 
                 7.4824 
                 4.3647 
                 3.1177 
                 120.3120 
                 348.2453 
                 0.3455 
                 31.5079 
                 1.6567 
                 6.5014 
               
               
                 22 
                 18.8223 
                 11.6036 
                 7.2187 
                 4.2109 
                 3.0078 
                 114.7240 
                 365.6576 
                 0.3137 
                 33.0833 
                 1.6740 
                 6.4344 
               
               
                 23 
                 19.5578 
                 12.6743 
                 6.8834 
                 4.0153 
                 2.8681 
                 107.7858 
                 383.9405 
                 0.2807 
                 34.7375 
                 1.6916 
                 6.3674 
               
               
                 24 
                 20.3224 
                 13.8553 
                 6.4672 
                 3.7725 
                 2.6946 
                 99.3198 
                 403.1375 
                 0.2464 
                 36.4743 
                 1.7093 
                 6.3013 
               
               
                 25 
                 21.1222 
                 15.1630 
                 5.9592 
                 3.4762 
                 2.4830 
                 89.1229 
                 423.2944 
                 0.2105 
                 38.2981 
                 1.7268 
                 6.2374 
               
               
                 26 
                 21.9671 
                 16.6198 
                 5.3474 
                 3.1193 
                 2.2281 
                 76.9592 
                 444.4591 
                 0.1732 
                 40.2130 
                 1.7434 
                 6.1781 
               
               
                 27 
                 22.8762 
                 18.2587 
                 4.6176 
                 2.6936 
                 1.9240 
                 62.5485 
                 466.6820 
                 0.1340 
                 42.2236 
                 1.7578 
                 6.1274 
               
               
                 28 
                 23.8894 
                 20.1365 
                 3.7529 
                 2.1892 
                 1.5637 
                 45.5395 
                 490.0161 
                 0.0929 
                 44.3348 
                 1.7675 
                 6.0940 
               
               
                 29 
                 25.1105 
                 22.3781 
                 2.7324 
                 1.5939 
                 1.1385 
                 25.4383 
                 514.5169 
                 0.0494 
                 46.5515 
                 1.7656 
                 6.1005 
               
               
                 30 
                 26.9646 
                 25.4383 
                 1.5263 
                 0.8903 
                 0.6360 
                 1.2719 
                 540.2428 
                 0.0024 
                 48.8791 
                 1.7264 
                 6.2390 
               
               
                   
               
             
          
         
       
     
     
       
         
               
               
               
               
               
               
             
               
             
               
               
               
               
               
               
               
               
               
               
               
               
             
           
               
                 TABLE VIII 
               
               
                   
               
             
             
               
                 LOAN AMOUNT: 
                 $100.00 
                 BUILDING VALUE: 
                 $125.00 
                 BUILDING ROR: 
                 9.50% 
               
               
                 TERM IN YEARS: 
                 30 
                 INFLATION: 
                 5.00% 
                 SPREAD: 
                 2.50% 
               
               
                 INTEREST RATE: 
                 3.50% 
                 APPRECIATION RATE: 
                 4.00% 
               
               
                   
               
             
          
           
               
                 ANALYSIS FOR DEPOSITORY INSTITUTION: 
               
             
          
           
               
                   
                   
                 PRIN- 
                 IN- 
                 IN- 
                   
                 AD- 
                   
                   
                   
                   
                   
               
               
                   
                   
                 CIPAL  
                 TEREST 
                 TEREST 
                 SPREAD 
                 JUSTED 
                 BUILD- 
                   
                 BUILD- 
                 DEBT 
                 REAL 
               
               
                   
                 ABML 
                 PAY- 
                 PAY- 
                 PASS- 
                 RE- 
                 PRIN- 
                 ING 
                 L/V 
                 ING 
                 COV- 
                 PAY- 
               
               
                 YEAR 
                 PMTS 
                 MENT 
                 MENT 
                 THROUG  
                 TAINED 
                 CIPAL 
                 VALUE 
                 RATIO 
                 INCOME 
                 ERAGE 
                 MENT 
               
               
                   
               
               
                 0 
                   
                   
                   
                   
                   
                 100.0000 
                 125.0000 
                   
                   
                   
                   
               
               
                 1 
                 7.9371 
                 1.9371 
                 6.0000 
                 3.5000 
                 2.5000 
                 103.0629 
                 130.0000 
                 0.7928 
                 11.8750 
                 1.4961 
                 7.5592 
               
               
                 2 
                 8.2909 
                 2.1072 
                 6.1838 
                 3.6072 
                 2.5766 
                 106.1089 
                 135.2000 
                 0.7848 
                 12.3500 
                 1.4323 
                 7.5201 
               
               
                 3 
                 8.6588 
                 2.2922 
                 6.3665 
                 3.7138 
                 2.6527 
                 109.1221 
                 140.6080 
                 0.7761 
                 12.8440 
                 1.4263 
                 7.4798 
               
               
                 4 
                 9.0410 
                 2.4937 
                 6.5473 
                 3.8193 
                 2.7281 
                 112.0845 
                 146.2323 
                 0.7665 
                 13.3578 
                 1.4206 
                 7.4381 
               
               
                 5 
                 9.4381 
                 2.7130 
                 6.7251 
                 3.9230 
                 2.8021 
                 114.9756 
                 152.0816 
                 0.7560 
                 13.8921 
                 1.4153 
                 7.3950 
               
               
                 6 
                 9.8504 
                 2.9519 
                 6.8985 
                 4.0241 
                 2.8744 
                 117.7725 
                 158.1649 
                 0.7446 
                 14.4478 
                 1.4103 
                 7.3505 
               
               
                 7 
                 10.2783 
                 3.2120 
                 7.0664 
                 4.1220 
                 2.9443 
                 120.4492 
                 164.4915 
                 0.7323 
                 15.0257 
                 1.4057 
                 7.3046 
               
               
                 8 
                 10.7222 
                 3.4953 
                 7.2269 
                 4.2157 
                 3.0112 
                 122.9763 
                 171.0711 
                 0.7189 
                 15.6267 
                 1.4014 
                 7.2572 
               
               
                 9 
                 11.1825 
                 3.8039 
                 7.3786 
                 4.3042 
                 3.0744 
                 125.3212 
                 177.9140 
                 0.7044 
                 16.2518 
                 1.3974 
                 7.2083 
               
               
                 10 
                 11.6595 
                 4.1402 
                 7.5193 
                 4.3862 
                 3.1330 
                 127.4471 
                 185.0305 
                 0.6888 
                 16.9018 
                 1.3939 
                 7.1579 
               
               
                 11 
                 12.1535 
                 4.5067 
                 7.6468 
                 4.4606 
                 3.1862 
                 129.3128 
                 192.4318 
                 0.6720 
                 17.5779 
                 1.3907 
                 7.1059 
               
               
                 12 
                 12.6649 
                 4.9062 
                 7.7588 
                 4.5259 
                 3.2328 
                 130.8723 
                 200.1290 
                 0.6539 
                 18.2810 
                 1.3879 
                 7.0523 
               
               
                 13 
                 13.1941 
                 5.3418 
                 7.8523 
                 4.5805 
                 3.2718 
                 132.0741 
                 208.1342 
                 0.6346 
                 19.0123 
                 1.3855 
                 6.9971 
               
               
                 14 
                 13.7414 
                 5.8170 
                 7.9244 
                 4.6226 
                 3.3019 
                 132.8608 
                 216.4596 
                 0.6138 
                 19.7727 
                 1.3836 
                 6.9403 
               
               
                 15 
                 14.3071 
                 6.3354 
                 7.9717 
                 4.6501 
                 3.3215 
                 133.1684 
                 225.1179 
                 0.5915 
                 20.5637 
                 1.3820 
                 6.8820 
               
               
                 16 
                 14.8916 
                 6.9015 
                 7.9901 
                 4.6609 
                 3.3292 
                 132.9254 
                 234.1227 
                 0.5678 
                 21.3862 
                 1.3809 
                 6.8220 
               
               
                 17 
                 15.4952 
                 7.5197 
                 7.9755 
                 4.6524 
                 3.3231 
                 132.0520 
                 243.4876 
                 0.5423 
                 22.2417 
                 1.3802 
                 6.7605 
               
               
                 18 
                 16.1185 
                 8.1954 
                 7.9231 
                 4.6218 
                 3.3013 
                 130.4592 
                 253.2271 
                 0.5152 
                 23.1313 
                 1.3799 
                 6.6976 
               
               
                 19 
                 16.7619 
                 8.9344 
                 7.8276 
                 4.5661 
                 3.2615 
                 128.0478 
                 263.3561 
                 0.4862 
                 24.0566 
                 1.3800 
                 6.6333 
               
               
                 20 
                 17.4263 
                 9.7434 
                 7.6829 
                 4.4817 
                 3.2012 
                 124.7068 
                 273.8904 
                 0.4553 
                 25.0188 
                 1.3805 
                 6.5678 
               
               
                 21 
                 18.1126 
                 10.6302 
                 7.4824 
                 4.3647 
                 3.1177 
                 120.3120 
                 284.8460 
                 0.4224 
                 26.0196 
                 1.3813 
                 6.5014 
               
               
                 22 
                 18.8223 
                 11.6036 
                 7.2187 
                 4.2109 
                 3.0078 
                 114.7240 
                 296.2398 
                 0.3873 
                 27.0604 
                 1.3824 
                 6.4344 
               
               
                 23 
                 19.5578 
                 12.6743 
                 6.8834 
                 4.0153 
                 2.8681 
                 107.7858 
                 308.0894 
                 0.3499 
                 28.1428 
                 1.3836 
                 6.3674 
               
               
                 24 
                 20.3224 
                 13.8553 
                 6.4672 
                 3.7725 
                 2.6946 
                 99.3198 
                 320.4130 
                 0.3100 
                 29.2685 
                 1.3848 
                 6.3013 
               
               
                 25 
                 21.1222 
                 15.1630 
                 5.9592 
                 3.4762 
                 2.4830 
                 89.1229 
                 333.2295 
                 0.2675 
                 30.4392 
                 1.3857 
                 6.2374 
               
               
                 26 
                 21.9671 
                 16.6198 
                 5.3474 
                 3.1193 
                 2.2281 
                 76.9592 
                 346.5587 
                 0.2221 
                 31.6568 
                 1.3857 
                 6.1781 
               
               
                 27 
                 22.8762 
                 18.2587 
                 4.6176 
                 2.6936 
                 1.9240 
                 62.5485 
                 360.4211 
                 0.1735 
                 32.9231 
                 1.3838 
                 6.1274 
               
               
                 28 
                 23.8894 
                 20.1365 
                 3.7529 
                 2.1892 
                 1.5637 
                 45.5395 
                 374.8379 
                 0.1215 
                 34.2400 
                 1.3781 
                 6.0940 
               
               
                 29 
                 25.1105 
                 22.3781 
                 2.7324 
                 1.5939 
                 1.1385 
                 25.4383 
                 389.8314 
                 0.0653 
                 35.6096 
                 1.3636 
                 6.1005 
               
               
                 30 
                 26.9646 
                 25.4383 
                 1.5263 
                 0.8903 
                 0.6360 
                 1.2719 
                 405.4247 
                 0.0031 
                 37.0340 
                 1.3206 
                 6.2390 
               
               
                   
               
             
          
         
       
     
                                                                                                 TABLE IX                   LOAN AMOUNT:   $100.00   BUILDING VALUE:   $125.00   BUILDING ROR:   9.50%       TERM IN YEARS:   30   INFLATION:   5.00%   SPREAD:   2.50%       INTEREST RATE:   3.50%   APPRECIATION RATE:   3.00%                    ANALYSIS FOR DEPOSITORY INSTITUTION:                    PRIN-   IN-   IN-       AD-                                   CIPAL    TEREST   TEREST   SPREAD   JUSTED   BUILD-       BUILD-   DEBT   REAL           ABML   PAY-   PAY-   PASS-   RE-   PRIN-   ING   L/V   ING   COV-   PAY-       YEAR   PMTS   MENT   MENT   THROUG    TAINED   CIPAL   VALUE   RATIO   INCOME   ERAGE   MENT               0                       100.0000   125.0000                       1   7.9371   1.9371   6.0000   3.5000   2.5000   103.0629   128.7500   0.8005   11.8750   1.4961   7.5592       2   8.2909   2.1072   6.1838   3.6072   2.5766   106.1089    132.6125   0.8001   12.2313   1.4323   7.5201       3   8.6588   2.2922   6.3665   3.7138   2.6527   109.1221    136.5909   0.7989   12.5982   1.4126   7.4798       4   9.0410   2.4937   6.5473   3.8193   2.7281   112.0845    140.6886   0.7967   12.9761   1.3934   7.4381       5   9.4381   2.7130   6.7251   3.9230   2.8021   114.9756    144.9093   0.7934   13.3654   1.3749   7.3950       6   9.8504   2.9519   6.8985   4.0241   2.8744   117.7725    149.2565   0.7891   13.7664   1.3568   7.3505       7   10.2783   3.2120   7.0664   4.1220   2.9443   120.4492    153.7342   0.7835   14.1794   1.3394   7.3046       8   10.7222   3.4953   7.2269   4.2157   3.0112   122.9763   158.3463   0.7766   14.6048   1.3224   7.2572       9   11.1825   3.8039   7.3786   4.3042   3.0744   125.3212    163.0966   0.7684   15.0429   1.3060   7.2083       10   11.6595   4.1402   7.5193   4.3862   3.1330   127.4471   167.9895   0.7587   15.4942   1.2902   7.1579       11   12.1535   4.5067   7.6468   4.4606   3.1862   129.3128    173.0292   0.7473   15.9590   1.2749   7.1059       12   12.6649   4.9062   7.7588   4.5259   3.2328   130.8723    178.2201   0.7343   16.4378   1.2601   7.0523       13   13.1941   5.3418   7.8523   4.5805   3.2718   132.0741    183.5667   0.7195   16.9309   1.2458   6.9971       14   13.7414   5.8170   7.9244   4.6226   3.3019   132.8608    189.0737   0.7027   17.4388   1.2321   6.9403       15   14.3071   6.3354   7.9717   4.6501   3.3215   133.1684    194.7459   0.6838   17.9620   1.2189   6.8820       16   14.8916   6.9015   7.9901   4.6609   3.3292   132.9254    200.5883   0.6627   18.5009   1.2062   6.8220       17   15.4952   7.5197   7.9755   4.6524   3.3231   132.0520    206.6060   0.6391   19.0559   1.1940   6.7605       18   16.1185   8.1954   7.9231   4.6218   3.3013   130.4592   212.8041   0.6130   19.6276   1.1822   6.6976       19   16.7619   8.9344   7.8276   4.5661   3.2615   128.0478    219.1883   0.5842   20.2164   1.1710   6.6333       20   17.4263   9.7434   7.6829   4.4817   3.2012   124.7068    225.7639   0.5524   20.8229   1.1601   6.5678       21   18.1126    10.6302   7.4824   4.3647   3.1177   120.3120   232.5368   0.5174   21.4476   1.1496   6.5014       22   18.8223    11.6036   7.2187   4.2109   3.0078   114.7240   239.5129   0.4790   22.0910   1.1395   6.4344       23   19.5578    12.6743   6.8834   4.0153   2.8681   107.7858   246.6983   0.4369   22.7537   1.1295   6.3674       24   20.3224    13.8553   6.4672   3.7725   2.6946   99.3198   254.0993   0.3909   23.4363   1.1196   6.3013       25   21.1222    15.1630   5.9592   3.4762   2.4830   89.1229   261.7222   0.3405   24.1394   1.1096   6.2374       26   21.9671    16.6198   5.3474   3.1193   2.2281   76.9592   269.5739   0.2855   24.8636   1.0989   6.1781       27   22.8762    18.2587   4.6176   2.6936   1.9240   62.5485   277.6611   0.2253   25.6095   1.0869   6.1274       28   23.8894    20.1365   3.7529   2.1892   1.5637   45.5395   285.9910   0.1592   26.3778   1.0720   6.0940       29   25.1105    22.3781   2.7324   1.5939   1.1385   25.4383   294.5707   0.0864   27.1691   1.0505   6.1005       30   26.9646    25.4383   1.5263   0.8903   0.6360   1.2719   303.4078   0.0042   27.9842   1.0076   6.2390                    
rate and yet by the 30th year is still higher than 1. This means that the income generated by the property will fully cover the cost of debt service associated with the loan at that time.
 
     While matching will reduce the interest rate exposure of the intermediary it will not increase credit risk. In fact, because the borrower&#39;s debt service on an inflation-adjusting loan with a 300 basis point markup is quite modest at 8.25 per $100, there is substantial debt coverage. 
     This option is especially attractive to intermediaries that undertake interim construction loans on real estate because the long-term inflation-adjusting deposit accounts with its potential to finance a long-term inflation-adjusting Mortgage loans would provide permanent takeout money for the intermediary. This would be true either by design or necessity. In this case the intermediary enters a fully matched-book program on a long-term rather than a short-term basis. 
     In order to maintain the longevity of the match, the deposit and loan account would provide for substantial penalties for early withdrawal and correspondingly, the loan account would carry a substantial prepayment penalty. These penalties do not significantly detract from the appeal of both the deposit and loan accounts. 
     The foregoing invention has been described in terms of preferred embodiments. However, those of skill in the art will recognize that many variations of such embodiments exist. Such variations are intended to be within the scope of the present invention and the appended claims.