You have just purchased a six-month, $680,000 negotiable CD, which will pay a 9.

Question

You have just purchased a six-month, $680,000 negotiable CD, which will pay a 9.5 percent annual interest rate.

If the market rate on the CD rises to 10 percent, what is its current market value? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

If the market rate on the CD falls to 9.25 percent, what is its current market value? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

If the market rate on the CD rises to 10 percent, what is its current market value? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Before the rate change the CD holder will receive

FV= 6,80,000 (1+0.095/2)

=$712300

Immediately after the Increase in CD rates in the market the CD value decreases to

$712300/(1+0.10/2)

=$678380.95

If the Market Rate falls to 9.25% then the rate of Cd will be

$712300/(1+0.0925/2)

=$680812.42

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