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

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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 face value 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...
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Financial Markets and Institutions

ISBN: 978-0077861667

6th edition

Authors: Anthony Saunders, Marcia Cornett

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