Question
A bank has issued a six-month, $2 million negotiable CD with a 0.52 percent quoted annual interest rate (iCD, sp). a. Calculate the bond equivalent
A bank has issued a six-month, $2 million negotiable CD with a 0.52 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? (Round your answers to 2 decimal places.) c. Immediately after the CD is issued, the secondary market price on the $2 million CD falls to $1,998,750. Calculate the new secondary market quoted yield, the bond equivalent yield, and the EAR on the $2 million face value CD. (Assume 6 months = 180 days. Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your answers to 4 decimal places.(e.g., 32.1615))
a. | |
Bond equivalent yield | % |
Effective annual return | % |
b. | |
Value at maturity | $ |
c. | |
SP quoted yield | % |
Bond equivalent yield | % |
Effective annual return | % |
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