Submitted by BDizzleNizzle t3_yiam8u in personalfinance
Ruminant t1_iuhql52 wrote
Yes, the drop in value is because interest rates have risen. To resell the brokered CD, you have to offer someone a better deal than they can get buying a new brokered CD with a similar maturity date. Effectively, you have to sell the CD at enough of a discount so that they "break even" as compared to new CDs with higher interest rates.
The closer the CD is to maturing, the less of an impact that interest rates will have on its resale value (the value reported by the brokerage). A one-percent difference in interest rates matters a lot more when there is a year of interest remaining versus just one month remaining. As such, the price of the brokered CD will not trend down to $0, but should instead gradually trend back towards its face value (how much it pays out at maturity).
BDizzleNizzle OP t1_iui0j6c wrote
Thanks!
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