Complete Question:
A customer owns a long-term negotiable CD. If the customer wishes to tender the CD prior to maturity, the registered representative should inform the customer that:
A. a prepayment penalty will be charged
B. he or she will receive par value of the principal plus accrued interest
C. the CD may not be redeemed prior to maturity
D. the customer will receive the market value plus accrued interest
Answer:
D. the customer will receive the market value plus accrued interest.
Step-by-step explanation:
In this scenario, a customer owns a long-term negotiable certificate of deposit (CD). If the customer wishes to tender the CD prior to maturity, the registered representative should inform the customer that the customer will receive the market value plus accrued interest.
Generally, in the stock markets when a customer wishes to withdraw his or her funds on any brokered CD, there are no penalties for such actions or choice. The registered representative should pro-rate the amount of interest earned by the customer over the period of time for the deposit.