Question

"A customer buys a Brokered CD for $100,000. Upon receipt of his next account statement, the customer sees that the market value of the CD is shown as $99,800. This would occur because:"

Answer 1

Answer:

market rates have increased

Explanation:

Bonds as well as brokered CDs are priced depending on the market's interest rates for similar investments. For example, the CD pays a 3% interest, and then the market rate increases to 3.1% (or more), the CD's price will decrease. On the other hand, if the market rates decrease to 2.9% (or less), the CD's price will increase.