A Treasurer buys a 6-month CD issued by a top-class bank with a tenor of 180 days at a yield of 16%. The face value at issue is GHe10m. In 90-days time the buyer sells the CD when the 3-month secondary market for CDs issued in the names of top-class banks is 15.40/14.50. The buyer has held the CD for 90days, but now wants his cash back. What is the return on the investment for the Treasurer?

A Treasurer buys a 6-month CD issued by a top-class bank with a tenor of 180 days at a yield of 16%. The face value at issue is GHe10m. In 90-days time the buyer sells the CD when the 3-month secondary market for CDs issued in the names of top-class banks is 15.40/14.50. The buyer has held the CD for 90days, but now wants his cash back. What is the return on the investment for the Treasurer?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 2P

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Question

Example:
A Treasurer buys a 6-month CD issued by a top-class bank with a tenor of 180 days at a
yield of 16%. The face value at issue is GHe10m. In 90-days time the buyer sells the CD
when the 3-month secondary market for CDs issued in the names of top-class banks is
15.40/14.50. The buyer has held the CD for 90days, but now wants his cash back.
What is the return on the investment for the Treasurer?

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A Treasurer buys a 6-month CD issued by a top-class bank with a tenor of 180 days at a yield of 16%. The face value at issue is GH¢10m. In 90-days time the buyer sells the CD when the 3-month secondary market for CDs issued in the names of top-class banks is 15.40/14.50. The buyer has held the CD for 90days, but now wants his cash back. What is the return on the investment for the Treasurer?
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