MONEY MARKET: CERTIFICATE OF DEPOSIT ******************************************** A certificate of deposit (CD) is a time deposit with a bank. CDs are generally issued by commercial banks but they can be bought through brokerages. They bear a specific maturity date (from three months to five years), a specified interest rate, and can be issued in any denomination, much like bonds. Like all time deposits, the funds may not be withdrawn on demand like those in a checking account. CDs offer a slightly higher yield than T-Bills because of the slightly higher default risk for a bank but, overall, the likelihood that a large bank will go broke is pretty slim. Of course, the amount of interest you earn depends on a number of other factors such as the current interest rate environment, how much money you invest, the length of time and the particular bank you choose. While nearly every bank offers CDs, the rates are rarely competitive, so its important to shop around. The main advantage of CDs is their relative safety and the ability to know your return ahead of time. Youll generally earn more than in a savings account, and you wont be at the mercy of the stock market.
Posted on: Thu, 15 May 2014 11:05:18 +0000
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