A 7% CD was issued at par, which you now purchase at 6.75%. You would expect to pay:
A) The face value of the CD
B) More than the face value
C) Less than the face value
D) Too little information to decide

Question

Quizplus · Accepted Answer

When the interest rate on a CD decreases from the original rate (7% to 6.75%), the price of the CD increases, meaning you would pay more than the face value.

A 7% CD Was Issued at Par, Which You Now