2.

a. If you buy a $100,000 Certificate of Deposit for 3 months at a rate of 3%, how much do you pay for it now?

b. What is the total amount that the bank that issued the CD will repay at maturity?

c. If you sell that same CD after 2 months at a rate of 3.5%, what will its present value be?

d. What is the annualized holding-period or realized rate of return for the 2 months you have held it?