You have just purchased a three-month, $700,000 negotiable CD, which will pay a

Question

You have just purchased a three-month, $700,000 negotiable CD, which will pay a 6.5 percent annual interest rate. a. If the market rate on the CD rises to 7 percent, what is its current market value? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Current market value $ b. If the market rate on the CD falls to 6.25 percent, what is its current market value? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Current market value $

Explanation / Answer

Face value (FV) $                                     700,000 Coupon rate 6.50% Number of compounding periods per year 4 Interest per period (PMT) $                                       11,375 Number of years to maturity 0.25 Number of compounding periods till maturity (NPER) 1 Market rate of return/Required rate of return 7.00% Market rate of return/Required rate of return per period (RATE) 1.75% Current market value PV(RATE,NPER,PMT,FV)*-1 Current market value $                               699,140.05 Face value (FV) $                                     700,000 Coupon rate 6.50% Number of compounding periods per year 4 Interest per period (PMT) $                                       11,375 Number of years to maturity 0.25 Number of compounding periods till maturity (NPER) 1 Market rate of return/Required rate of return 6.25% Market rate of return/Required rate of return per period (RATE) 1.56% Current market value PV(RATE,NPER,PMT,FV)*-1 Current market value $                               700,430.77

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