|
| What is a Market Value Adjustment? |
A Market Value Adjustment (MVA) is an adjustment applied to guaranteed interest investments based on changes in interest rates that have occurred since an investment was purchased. For example: A $1,000 5-Year Guaranteed Interest Account (GIA) pays a 10% interest rate and has 2 years left to maturity. The value of the account is currently $1,331. If left until maturity it will grow to $1,610. If interest rates today are at 11% and you cash in your investment, its Market Value would be $1,307 -- an adjustment of -$24. This is because, if you then invested this $1,307 today in a 5 year deposit at the current 11%, you would have $1,610 in 2 years -- exactly the same dollar amount you would have if you made no withdrawal and subsequent reinvestment at all. |