A bank has issued a six-month, $2.0 million negotiable CD with a 0.50 percent quoted annual...

A bank has issued a six-month, $2.0 million negotiable CD with a 0.50 percent quoted annual interest rate (i_CD,
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

Expert Solution

Given,

Negotiable CD = $ 2.0 million or $ 2000000

Quoted annual interest rate = 0.50%

Solution :-

jeff jeffy answered 4 months ago

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