Certificates of Deposit (CD) are among the class of fixed income investments that are offered at your bank. Certificate of deposits as well as treasury and corporate bonds usually have a fixed interest rate and length of time (3 months, 6 months, 1 year, 3 years) but they are less risky than corporate bonds because they are insured by the FDIC and by the National Credit Union Administration, in the case of CDs issued by credit unions (you should always check with your bank or credit union whether your CD is insured). As is usually the case with fixed income instruments, CDs with longer term maturities usually, but not always, pay greater interest rates. Early withdrawal penalties are ordinarily about 10% of the total interest accrued, although this can vary substantially. Any premium in interest rates that a reputable bank offers over treasury yields usually is related to the “value” a bank can add to your investment.

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