How to Calculate CD Market Value

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The market value of your CD is its worth that can be a present value or future value. In the world of brokered CDs, CDs purchased on the open market through investment brokers, determining your market value involves traditional bank-held CDs. You can't just take the accumulated cash and subtract any early withdrawal penalties or fees. You must consider the existing market conditions to see what someone else will pay for your CD at any given time. Determining the exact value is based on an offer from a party willing to buy it.

Determine the par value of the CD. This is the value of the CD at its maturity date that takes the face value (what you invested) and the interest you receive up until the maturity date. This is the market value of the CD on the maturity date. For example, if you invest $1,000 in a 5 percent CD for one year, your par value is $1,050 when due.

Look at the existing interest rate conditions. Trying to determine the present market value means comparing it to existing interest-driven investments. If interest rates go up, your CD has a lower market value because investors find higher rates attractive. If the interest rates go down, market value goes up since investors will pay more for a higher rate of return. For example, a person probably won't want to buy a 5 percent CD when interest rates have moved to 10 percent but will be interested in it if interest rates drop to 3 percent.

Calculate the adjusted market interest rate for your CD. The investor has a face value of $1,000. At a 10 percent interest rate, this would yield $100 in return, making it a $1,100 par value. Divide the face value by the par value to find the present market value, in this case dropping to $909.09.

Tips

  • When interest rates drop in the market, instead of dividing the face value by the adjusted par value, use the original par value to determine the premium. With the example above, $1,050 divided by $1,030 to equal $1019.41 as the present market value.

Warnings

  • When you buy a brokered CD on the primary market (offered directly from the bank at issue), the broker should not charge you a fee as the broker gets paid by the bank. When you buy or sell a brokered CD on the secondary market (after issue in the middle of the term) the broker can charge a fee. Be sure to ask what those are to calculate how that affects your market value.

References

About the Author

With more than 15 years of professional writing experience, Kimberlee finds it fun to take technical mumbo-jumbo and make it fun! Her first career was in financial services and insurance.

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