Mar 21 2011

What is a certificate of deposit or CD?

Category: Finance

Answer:

Savings, CDA certificate of Deposit or CD is a type of debt instrument that is typically offered to investors through commercial banks, thrifts, credit unions, and other financial institutions. They are different than money market and savings accounts because they offer the investor a higher, fixed (some are offered as variable) rate of return. The higher return will often accompany a larger deposit sum, a longer term to maturity, and the inability to withdraw the deposited funds on demand (no liquidity without penalty). Most CDs are offered in fixed terms in 3 months, 6 months, and 1-5 year periods. When the CD is held to maturity, the principle and accumulated interest can be withdrawn. Virtually all CDs are insured by the FDIC or NCUA.


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