-What Is Market Value of the Two-Year CD If All

Multiple Choice

$$\begin{array} { | l | r | l | l | r | l | } \hline \text { Assets } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} & \text { Liabilities } & \begin{array} { l } \text { Amount } \\\text { (\$ millions) }\end{array} & \begin{array} { l } \text { Annual } \\\text { Rate }\end{array} \\\hline \text { 1-year bonds } & \$ 60 & 7 \% & \text { 1-year CD } & \$ 50 & 5 \% \\\hline \text { 10-year loan } & \$ 40 & 12 \% & \text { 2-year CD } & \$ 40 & 6 \% \\\hline & & & \text { Equity } & \$ 10 & \\\hline \text { Total } & \$ 100 & & \text { Total } & \$ 100 & \\\hline\end{array}$$
-What is market value of the two-year CD if all market interest rates increase by 2 percent?

A) $40.381 million.
B) $39.626 million.
C) $40.000 million.
D) $38.573 million.
E) $40.769 million.