In: Finance
A bank has issued a six-month, $2.0 million negotiable CD with a
0.50 percent quoted annual interest rate (iCD,
sp).
a. Calculate the bond equivalent yield and the EAR
on the CD.
b. How much will the negotiable CD holder receive
at maturity?
c. Immediately after the CD is issued, the
secondary market price on the $2 million CD falls to $1,998,500.
Calculate the new secondary market quoted yield, the bond
equivalent yield, and the EAR on the $2.0 million face value
CD.
Use 365 days in a year
Given,
Negotiable CD = $ 2.0 million or $ 2000000
Quoted annual interest rate = 0.50%
Solution :-