A bank has issued a six-month, $ 5 million negotiable CD with a 0.35 percent quoted annual

Question:

A bank has issued a six-month, $ 5 million negotiable CD with a 0.35 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 $ 5 million CD falls to $ 4,994,500. Calculate the new secondary market quoted yield, the bond equivalent yield, and the EAR on the $ 5 million CD.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...