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Commercial Finance Partners AG (CFP Bank) issues 90-day certificates of deposit (CDs) to fund its floating-rate loans made to customers. The objective is to maintain a match between the bank’s assets (floating-rate loans) and its funding sources. The quoted add-on rate for its 90-day CD is 0.12%, assuming a 365-day year. If the initial principal amount is EUR20 million, the redemption amount due at maturity is found by rearranging Equation 4 and entering PV = 20,000,000, Days = 90, Year = 365, and AOR = 0.0012.
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