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A negotiable certificate of deposit, usually abbreviated to NCD, is a fixed deposit receipt issued by
a bank that is negotiable in the secondary market for financial assets. The issuing bank undertakes
to pay the amount of the deposit plus the interest on maturity date (in the case of short term
NCDs), or interest six-monthly in arrears and the deposit amount on maturity (in the case of long
NCDs). An NCD certificate contains the following information:

Name of issuing bank

Issue date

Maturity date

Amount of the deposit

Rate of interest per cent per annum

Maturity value (amount of the deposit plus interest) in the case of short NCDs

Interest dates (in the case of long NCDs)

Historical background
The United States was the first country to create NCDs, and this took place in February 1961. As far
as can be ascertained, South Africa was the second country to issue NCDs, and the first issue was
made in July 1964. The first English issue took place on 28 October 1968. Building societies first
issued NCDs in South Africa on 12 October 1983.
A joint press statement of the four large banks was released on 21 July 1964 regarding the
introduction of NCDs from 22 July. The first issuers were Barclays Bank DCO (now First National
Bank) and the Netherlands Bank (later Nedbank and now Nedcor Bank). The exact date of the first
issue is not known, but it was within days of the press release. Barclays Bank issued their first NCD
on 25 July 1964 (see accompanying image).
The discount houses played a major role in the NCD market from its inception. Banking
correspondence reveals that the two discount houses in existence in 1964 were approached by the
first issuers to act as brokers and market makers in NCDs.

Purpose of issue
As the name of the instrument hints, NCDs are deposits for fixed periods that are negotiable. Thus,
a NCD is issued in exchange for a deposit, ie it is an evidence of a deposit. The fact that it is
negotiable makes it an attractive instrument for investors, ie investors are not locked into the
This instrument is available only in large denominations, ie R1 million and above, and this renders
it a wholesale instrument. Thus the primary (and secondary) market is limited to the large
Legal environment
NCDs are common law instruments, ie there is no specific law that provides for and regulates
NCDs. However, the Regulations under the Banks Act 94 of 1990 limits the term of the instrument,
and the amount which banks may issue. In summary:

NCDs may not be issued for periods of longer than 3 years, unless the Registrar grants
authorisation in writing

Total NCDs issued may not exceed 30% of the total amount of liabilities to the public

NCDs with maturity of 12 months or less may not exceed 20% of liabilities to the public

NCDs do not rank as liquid assets for banks, and they are not eligible for use as repo assets with
the Reserve Bank.
In South Africa a standard set of conditions applies to the issue of NCDs. These are found on the
reverse of the certificate.
As noted, NCDs may be issued for periods of up to three years (unless the Registrar of Banks has
authorised a deviation from the Regulations). When issued for periods of less than one year,
interest is usually payable at the end of the period. When issued for longer than one year, interest
may be payable either at the end of the period or six-monthly in arrears, but usually the latter.
NCDs are also issued at variable rates, usually with reference to some benchmark rate.
NCDs are usually issued in bearer form (ie not payable to any particular person), and only
occasionally in the name of the depositor. In this case the endorsement of the investor is required
for transfer.
NCDs may be issued in any amount, but are usually issued in denominations of R1 million. At times
a bank may issue denominations of R500 000 and even R100 000 but only when part of a larger
Banks are willing to split larger denomination NCDs into smaller denominations.
Amount in issue
Between the first issue in 1964 and the first quarter of 1965 the total amount of NCDs issued grew
slowly, ie up to R3 million, and stood at only R104 million at the end of 1967. It was after this
period that NCDs issued grew rapidly, the amount of R2 billion being first breached in 1982.
Since 1969 total NCDs issued has kept pace with the growth in bank deposits and as a ratio thereof
has fluctuated between 10% and 20%. The amount outstanding for banks was approximately R28
billion at the end of 1991, and approached R90 billion ten years later.

Of all the money market instruments, NCDs have the largest market capitalisation (outstanding
amount). The chart below shows NCDs outstanding as a ratio of deposits.

Primary market
Demand for NCDs arises from a wide array of institutions including money market funds, banks
other than the issuer, mining houses, pension funds, insurance companies, cash-rich commercial
and industrial companies, and high net-worth individuals.
These instruments are available across the full maturity spectrum and quality spectrum. Banks are
willing to tailor maturity dates to meet the needs of investors. NCDs offer the same security as a
term deposit with the bank in question, but are fully negotiable before the date of maturity.
Not all banks are able to issue NCDs at the same rate. The rates payable depend on the rating of
the bank by a recognised rating agency. The smaller banks have difficulty in issuing NCDs.
The method of issue of NCDs could be called pro-action and re-action. Banks (via their treasury
divisions) are in daily contact with the larger investors and endeavour to market their NCDs to
cover maturities and to accommodate new funds available. The banks also respond to contact
initiated by investors.
Ownership distribution
No statistics on ownership distribution are available in South Africa at present, but they are held by

the same institutions that are involved in the primary market, as mentioned above. The main
holders tend to be the financial intermediaries, particularly pension funds, money market funds
and insurance companies. Cash-rich companies, such as mining houses, are also large investors.
Secondary market
An NCD issued to bearer is transferable by delivery alone. If an NCD is issued repayable to a
particular depositor, it is transferable by delivery plus the endorsement on the reverse of the
certificate. The endorsement may be in blank or to order.
A secondary market in NCDs is made by the larger banks themselves in their own paper. This
means that they are prepared to quote firm buying and selling rates, for immediate settlement, on
their own NCDs, and in amounts of R20-30 million. They are usually only prepared to make a
market in NCDs with a currency of up to one year.
The discount houses were prepared to make a market in all prime NCDs during the period of their
existence, from 1957 to 1992. No institution, other than the banks, at this stage is prepared to
make a market in all NCDs.
The main participants in the secondary market are the money market funds, the pension funds,
insurance companies and mining houses.
Issue and dealing mathematics
The NCD, which is simply a fixed deposit that is negotiable, is the most issued and traded money
market instrument in the South African money market. NCDs are issued in a number of ways and
different mathematics applies in each case. The most common type of NCD is one with a tenor of
less than one year where the amount invested (deposited) is given (for example R1 million) and
where interest is payable at maturity.
At issue the typical simple interest calculation is involved, as follows:
FV = PV [1 + (ir x t)]
PV = present value (amount of deposit)
FV = future value (PV + the interest amount)
ir = interest rate negotiated
t = term of deposit in days, expressed as t / 365.
An example will make this clear:
PV = R1 000 000
ir = 9.8% pa
t = 180 / 365
The maturity value (MV), which is the FV, is calculated by the deposit-taking bank and placed on
the certificate:
Maturity value (FV) = PV [1 + (0.098 x 180/365)]
= R1 000 000 (1.04832877)
= R 1 048 328.77.
When NCDs are traded in the money market, the givens are:

The maturity value (MV or FV)

The maturity date

The settlement date

The rate at which the trade takes place.

These variables are used to calculate the consideration, ie the amount to be paid by the purchaser
(or received by the seller). The consideration is nothing else but the PV. The formula used in
secondary market trades is as follows:
PV = FV / [1 + (ir x t)].
An example will be useful. A company would like to invest an amount close to R1 million and
approaches its broker in this regard. The broker makes a few phone calls and offers the investor a
NCD with the following characteristics:
Maturity value (FV) = R1 054 246.58 (this was calculated at issue)
Maturity (due) date = 20 June 2002
Date of transaction = 21 January 2002
t = 150 / 365 (ie 21 January to 20 June)
Rate traded at (ir) = 9.2% pa.
The investor accepts the deal and the consideration is calculated:
Consideration (PV)
= R1 054 246.58 / [1 + (0.092 x 150/365)]
= R1 054 246.58 / 1.03780822
= R1 015 839.50.
Payment on maturity date
On maturity date the holder of an NCD presents the certificate to the issuing bank, which issues a
cheque for the face value plus the accrued interest, ie the maturity value. NCDs are in the process
of being dematerialised, and when complete ownership will be evidenced by an electronic entry in
the books of the central scrip depository (CSD - to be STRATE) and in the books of the relevant
central scrip depository participant (CSDP). Payment will be automatic and electronic to the holder
on maturity.


Negotiable Instruments Plays A Major

Negotiable Instruments plays a major role in the trade world. We can also see the use of
negotiable instruments in the international trade. We can assume that the international
trade is also developing with the negotiable instrument. The nature of negotiable
instrument is an area of law which has major influence on any person in his professional
field. Negotiable instrument plays a major role in different part of the world in raising the
economy. The term negotiable instrument does not have a statutary definition. To define
the term the concept of instrument' and negotiability' requires a separate consideration.
Thus any definition must be drawn from the common law.

According to professor Goode, instrument is described as a document of title of money

Therefore an instrument is a document which physically expresses the payment
obligation. An instrument will be in deliverable state only if it is signed by the possessor
or it should be with the authority of that person. The instrument clearly states the
contractual right to payment and the right will be transferred only after the complete
delivery. The person who has that entitlement and posses the instrument is consider as the
true owner.
The negotiable instrument is of contractual in nature and it characterizes the fact that it is
negotiable. The instrument can be transferred in a special manner which is established by
the law merchant i.e. by negotiation.
According to Blackburn J, a negotiable instrument has two characteristics namely 1. It is
transferable, like cash, by delivery (which assumes it is in a deliverable state) so that the
transferee can enforce the rights embodied in it in his own name. 2. The transferee being a
bonafide holder for value can acquire a better title to it than that of his transferor.
Negotiable Instrument is moreover a document of title which clearly explains the rights
towards the payment of money or a security for money which is transferable by delivery
either by custom or by legislation. The use of negotiable Instrument is mainly to facilitate
payment for exports and imports of trade. The rapid growth of technology has
revolutionized the world with computer, which is used in every field of profession. This
has reduced the use of negotiable instrument and in future it may decline more. Even
though the electronic revolution has got more advantages it may be considered as the next
step because the world needs time to get used to it. But, the negotiable instrument are still
in use.

Classes Of Instrument
Instruments can either be negotiable or non-negotiable. Negotiable and Non-negotiable
instrument have many classes in them but all the instruments will come under one of the
two categories namely,
An undertaking to pay a sum of money
An order to another to pay a sum of money
A negotiable instrument is one which, by statute or mercantile usage, may be transferred
by delivery and endorsement to a bona fide purchaser for value in such circumstances that
he takes free from defects in the title of prior parties.

A non negotiable instrument is one which, though capable of transfer by delivery (with
any necessary endorsement) in the same way as a negotiable instrument, can never confer
on the older a better right than vested in the transferor.

How Instruments Come To Be Negotiable

The documents can be recognized as negotiable instruments in two ways i.e.
Mercantile usage
Statute- statute is a formal written enactment which is made by a legislature,
which governs the state or city for the statute to become a law. It must be agreed
by the highest authorities in the government, and finally it is published by the
court. The term statute is an alternate word for law. In most of the cases, the
statutory recognition of negotiability altogether confirms the earlier judicially
acceptance of a mercantile usage which recognizes an instrument as negotiable.
The instruments like bills of exchange and cheques were accepted as negotiable by the
courts before they were recognized as a negotiable instrument by the Bills of Exchange
Act, 1882.
Mercantile usage- Through judicially recognized mercantile usage, an instrument
may be regarded as negotiable. The above mentioned statement can be made
stronger if we refer to the important case
Goodwin V/s Robarts. Here Cockburn CJ said that the instruments have derive their
negotiability from the law merchant had their origin, and that no very remote period, in
mercantile usage , and were adapted into the law by courts as being in conformity with
the usage of sale.
For the court to recognize the instrument through mercantile usage it must fulfill the
below mentioned conditions like:
The usage must be well known, definite and fair mercantile usage.
The mercantile usage should be general in nature i.e it should not be confined to
any mere custom which is used only to a particular section of the commercial

Advantages Of A Negotiable Instrument

Before 1874 in common law it was not permitted that the assignment of a promise to pay
money negotiable instrument comes into being because the transfer of promise to pay
money was not permitted in common law. At the end the negotiable instrument achieved
it. The important advantages of the negotiable instruments are as follows
the transferee of a negotiable instrument can sue his own name even though there
has been no assignment in writing or notice to the obligator or even if the transfer
is not absolute as required for assignment under the statue.
The transferee of a negotiable instrument who takes it for a value and in good faith
acquires a good title free from equities, whereas an assignee under the statue
always takes subject to equities
The negotiable instrument helps to provide investment.

Bills Of Exchange
Bills of exchange can be considered as the most popular negotiable instrument which is
not only used in foreign trade but It is also used in domestic trade. The bills of exchange
act 1882 is the primary source of law of bills of exchange. Sir Mackenzie Charmers
drafted the bills of exchange act 1882. Section 3 of bills of exchange 1882 defines bills of
exchange as A bill of exchange is an unconditional order in writing, addressed by one
person to another , signed by the person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or determinable future time a sum certain in
money to or to the order of a specified person, or to bearer
The common terms which are used in the bills of exchange are:
Drawer the person or a seller who issues the bill ordering to pay
Drawee the person or any party upon whom the bill is drawn
Payee the person to whom the amount mentioned in the bill is to be paid.When
the bill is delivered to a payee he becomes the first holder.
Acceptor the person who accepts the bill
The bills of exchange are used in 2 context associated with international trade

Documentary credit
Acceptance credit
The instrument to be a bill of exchange has to fulfill certain requisites. They are
The order given by the drawer to the drawee should be an unconditional order
The unconditional order given by the drawer to the drawee should be written and it
should include print.
The drawer should sign the instrument personally or to his agent. If the instrument
is forged and if the drawer is arguable, then the instrument cannot be treated as the
bills of exchange.
The instrument can be treated as bills of exchange only if it addressed by one
person to another
The name of the drawer and the payee should be clearly mentioned and also who
are the parties
The instrument should contain the exact amount payable in it to be a bill of
exchange. If the amount is mentioned as upto or not exceeding or atleast, then it
cannot be a bill of exchange.
The instrument should be drawn at a fixed time or at a ascertainable future time if
is drawn on a demand.
To enforce the bill and to claim payment from the drawer and endorser, the holder has to
follow a number of duties which are
A duty to present the bill for acceptance
A duty to give notice of dishonor by non- acceptance or non payment to the
drawer and prior endorser.
A duty to protect a foreign bill if dishonored for non acceptance or non

If the holder fails with these duties, he will release the drawer and endorser from their
liability on the bill. Bill of exchange is an order made by one person to another to pay
money to a third person.

Cheques are considered as an important negotiable instrument in international sales.
Cheques are primarily a payment direction and it is not a credit instrument. Cheque plays
an important role in the mechanism of banking. Therefore, cheques are deeply rooted in
the relationships of the bank and the customer. Section 73 of the Bills of Exchange Act,
1882, defines cheques as Bills of Exchange drawn on a banker payable on demand.
The nature of the cheque is that when it is presented, the payment is almost immediately
the cheques can be paid only to the named payee or his endorsee.
The cheque cannot be negotiated to a third party
The crossed cheque must be presented through a bank account for payment; the holder of
a crossed cheque cannot present it in person for cash. The bank does not accept the
cheque on which they are drawn.
The cheque may be considered as a debit instrument. For the payment, the cheque must
be presented to the paying bank i.e. the bank where the drawer keeps his account. The
cheque when it is presented for payment goes through a clearing system where the
collecting bank is entrusted to collect the amount of the cheque on behalf of the customer
and later credits it to his own account. Cheques play a fundamental part in the banking
field. Normally, the cheques are not discounted.

Promissory Note
Promissory note is also one of the important negotiable instruments in international sales.
Section 83 (1) of the Bills of Exchange Act, 1882, defines promissory notes as a
promissory note is an unconditional promise in writing made by one person to another
signed by the maker, engaging to pay, on demand or at a fixed or determinable future
time, a sum certain in money, to, or to the order f a specified person or to bearer.
A promissory note is just a promise to pay and it is not an order to pay. Therefore, in a
promissory note, there is no drawee. The maker of the promissory note is termed as a

promissor' and he corresponds with the acceptor of a bill. The note can be negotiated by
endorsement by the payee. The maker of a promissory note by making it
Engages that he will pay it according to his tenure.
Is precluded from denying to a holder in due course, the existence of the payee and
is then capacity to endorse.
According to Section 89 (1) (2), the indorser of a promissory note has to follow the same
duties and liabilities which an indorser of a bill under Section 55 (3) follows. But, there is
no reference to the accepted. If the drawer and the drawee are the same, the bill holder
has the option of treating it as a promissory note.
In international trade, promissory notes are mainly used in forfeiting transactions. Here,
the importer makes the promissory notes and the exporter will indorse to a forfeiter at a
discount. The forfeiter also bears all the credit risk, economic risk and political risk and
he must obtain the payment of the instrument. The forfeiter can also rediscount the
promissory note in the secondary market. In domestic trade, promissory note has two
They provide more security if made by a debtor or hirer
Unlike in international trade, they facilitate the refinancing of transactions in
which the notes can be discounted to a financial institution.
The negotiation of a promissory note can pass a title which is free from any defects in the
title of previous parties. This is the reason which makes promissory notes the main
negotiable instruments which are used as security for inland transactions.

Bank Note
Bank note is a kind of negotiable instrument. These bank notes are a special form of
promissory notes which are made by a bank, which engages to pay the bearer on demand
the sum which is expressed in the note. These bank notes are used as money. They are
also governed by the Bills if Exchange Act, 1882. The bank notes, after delivery, can be
transferable. If the bank notes are lost or destroyed, a duplicate can also be demanded
from the Bank of England by providing a satisfactory indemnity. The bank notes are
issued by Bank of England, Bank of Scotland and Bank of Northern Ireland. In many
jurisdiction, bank notes are legal tender.

Treasury Bills
Treasury bill is a kind of negotiable instrument which is used by the government. The
government issues it to raise the short term loans. These bills, usually, mature in less than
a year and the bills do not pay interest before the maturity. Therefore, the bills are used by
the bank as a source of short term funding. To create a positive field of maturity, these
bills can be sold at a discounted rate compared to the present value. These bills are issued
every week which are called as regular weekly treasury bills' with the maturity days like
28 days, 91 days, 182 days and 364 days. The treasury bills are largely purchased by
banks and other financial institution.

Banker's Draft
Banker's draft is a draft in which the funds are directly taken from the financial institution
instead of taking it from individual drawer's account. The draft can be paid at head office
or any branch office of the same bank. This banker's draft is mainly used in commercial
transactions to make payments. The banker's draft cannot be considered as legal cheque
because the drawer and the drawee are the same person. But the cheques Act, 1957, the
protection of bankers paying and collecting such instruments is as with valid cheques.

Dividend Warrants
Dividend warrants can be defined as demand drafts which are drawn by a company on a
bank ordering to pay a stock holder or shareholder with a sum of money which represents
his profit in the share of the company. The shareholder will be entitled with a share of the
declared dividend. Such amount can be drawn either in the form of a cheque or a banker's

Share Warrants
The public and the private companies, if authorized by their articles issue in respect of
fully paid shares. A share warrant under a common law which states, that the bearer of the
share warrant is entitled to the share which is specified in it. When a company issues a
share warrant, it must strike out the name of the share holder from the registry of
members. A share warrant is also negotiable, because it passes a title free from defects in
the title of previous holders upon mere delivery. The important feature and advantage of a
share warrant is that the owner of the share warrant cannot be identified by anyone even if
they look into the companies' public records. These warrants are easy to transfer.

Bearer Scrip
This is a type of negotiable instrument which is nothing but a certificate which is been
issued when a payment is deposited. The bearer scrip issued to an existing share holder
indicates that, the shareholder is entitled for the payment of further installments. The
bearer scrip is usually, used by the government and public companies.

Bearer Debenture
Bearer debentures are negotiable instruments which are transferable free from equities
upon mere delivery. There is no need to give the company a notice of transfer. Interests
are paid by attaching the coupon to the debenture. These coupons are the instruction to
the companies' banker which assist to pay the bearer a sum of money which is stated on
the coupon after a certain date. Only by advertisement, the company can communicate
with the holders of bearer debenture. The holders of bearer debenture may exchange them
for registered debentures. A debenture can also be in the form of promissory notes.

Bearer Bonds
It is a kind of negotiable instruments which acts as a security for debt which is issued by a
government or a corporation. These bearer bonds are completely different from other
common type investment securities. This instrument is not registered and there are no
records of the owner of the bond and no clue regarding the transactions involving
ownership. The person who physically holds the paper on which the bond is issued is the
owner of the instrument. So, if there is any loss or destruction of this bearer bond,
recovering the value is not possible.

Floating Rate Note

Floating rate notes are the type of bonds which have a variable coupon. These coupons
are equal to a money market reference rate. They also have a rate which remains constant.
Most of the floating rate notes are quarterly coupons. They are called so because they pay
back the interest only after every three months. Initially, every coupon period is
calculated by taking into account the fixing of the reference rate, which is therefore, that
day and by adding a rate, which remains constant. The floating rate notes carry an interest
rate risk with them.

Certificate Of Deposit

This negotiable instrument can be explained as a final product which is commonly

offered to consumers by bank and credit unions. The certificate of deposits has specified
fixed term and the terms are valid for a period like three months, 6 months or 1 5 years.
They also have a fixed rate of interest. If the certificate of deposit is kept till the maturity
date, the money can be with the drawer including the accrued interest. If the money is
kept as a deposit for an agreed term, we can get a higher rate of interest. The main
requirement of a certificate of deposit is a minimum deposit which may offer higher rate
for larger deposits. Interests are paid periodically through cheque or may be transferred
into the savings account according to the wish of the purchaser.

The above discussion makes clear that the negotiable instruments plays a major role in
the commercial world. These instruments can either be negotiable or non negotiable. But,
they must come under one of the two categories. An instrument becomes negotiable either
by statute or by mercantile usage. Among all other negotiable instruments, bills of
exchange, cheque and promissory notes are the three important negotiable instruments
which are widely used in international trade. Even though electronic revolution has
brought about many changes in the present world, but negotiable instruments are still in
use. The electronic revolution is considered as the next major step which replaces the
negotiable instruments. For this the future could improve and develop the problems which
prevail in e- revolution. In the present world, people in all fields of profession are getting
used to e- revolution. The present world, need to be trained to get used to this system of
working with e- revolution. It still takes time for the next generation to be ready to use the
e- revolution with no difficulties.

1. Export Trade: The Law And Practice Of International Trade By Schmitthoff,
Eleventh Edition, Carole Murray, David Holloway And Darre Electronic Banking
And Treasury Security Edited By Brain Welch
2. Cross Border Electronic Banking By Joseph. J. Norton, Chris Reed And Ian
3. Commercial Law By Roy Goode, Third Edition
4. Commercial Law: Texts, Cases And Materials By L.S. Sealey And R.J.A. Hooley,
Fourth Edition

5. Company Law, Smith And Keenans

6. A Guide To Negotiable Instruments 6th Edition Richardson

The Mechanics Of Certificate Of Deposits
This document is an effort to detail financial instrument Certificate of Deposit with
respect to United States of America.
CDs or Certificate of Deposit are market instruments of a short to medium duration
that pay a fixed rate of interest rate until the given maturity. In the retail market
(financial), opening a CD typically involves placing liquid funds or cash into savings
account held at financial institution that offers fixed interest rate till the set maturity
date arrives. Money placed in such a CD's cannot be usually withdrawn or can only
be withdrawn with advanced notice or by having a penalty attached to it.
CD's because of recent market volatility and uncertainty have become popular lowrisk investment option in America.
A certificate of deposit is a financial product offered in US by banks, financial
institutions, and credit unions. CDs are like savings bank accounts they are insured
and hence risk free. CD's are said to be risk free because they are insured by Federal
Deposit Insurance Corporation and by the National Credit Union Administration for
banks and credit unions respectively. CDs are different from saving accounts where
they has a specific, fixed term (one month to 5 years), and usually with a fixed
interest rate. Also usually CDs expected to be held until maturity in most of the
The most popular type of CD remains the traditional certificate of deposit, but with
increasing number of financial institutions offering a variety of nontraditional CDs
have a constituent of flexibility. If there is willingness to sacrifice a portion of yield,
CD's that suit better to your financial needs can be bought. CDs of less than 1 million
USD are called small CDs, CDs for more than 1 million USD are called jumbo CDs or
large CDs. Almost all of the large CDs, and very few smaller CDs, are negotiable.
Institutional investors, insurance agencies, banks and sometimes wealthy individuals
have large deposits of surplus wealth or cash and hence can buy negotiable CDs.
The interest rate, maturation dates on the CD's can be negotiated between the
depositor and the bank because of large sum of capital involved, this may vary
significantly from one CD to another. Suppose a wealthy depositor would like to save
his money for a particular duration, at some specified interest rate, may prefer to

buy a short duration CD to earn some interest on his money and at the same time
saving some portion of his wealth.
Mechanics of Certificate of Deposits
Traditional CD's
Fixed amount of money deposited for a specific term and receive a fixed
predetermined interest rate. The user has the option to en-cash the CD after
maturity or reinvest the same for another term whichever is suitable for the CD
holder. Most of the institutions allow you to add more funds to existing term or when
rolling over. Stiff penalties are levied for early withdrawal and compel you to lose
interest and, sometimes principal too. Federal regulations lay down only the
minimum early withdrawal penalty. However, laws do not prevent an institution from
sanctioning tougher penalties, but they must be revealed when the account is
Bump-up CD's
These bump-up CD's help you to take benefits of a raising interest rates. Assume you
buy a 2 year CD at a given rate and after a year of commencement of the plan bank
is offering an additional 0.25-points on 2 year CDs. These bump-up CD's gives you
the choice of earning the higher rate for the remaining term. Institutions who offer
these bump-up CD's usually allow one bump up per term.
The drawback of this type of CD is initially you may get a lower interest rate than
that of a traditional CD. The longer it takes for the interest rates to rise up, the
higher they'll have to go to make up for the earlier lower-rate portion of the term. So,
make sure you have convincing expectations about the interest rates before buying
a bump-up CD.
Zero-coupon CD's
Like zero-coupon bonds, there are also zero-coupon CDs. Just like in the bond, you
buy these zero coupon CD's at a high discount to par value. Zero-coupon means no
interest payments.
Callable CD's
The bank can "call" your CD after the pre mentioned time but before the maturity
date of CD. For example, if you buy a 10 year CD with 1 year call protection, the CD
can be called after the first year. Here in this case the bank is typically shifting
interest rate risk onto you as in when the interest rates rises the banks can call the
CD. i.e if they issue the CD at 5 % and after a year rates drop and the bank is now
paying 4 % on 10 CDs, the bank can call your Certificate of Deposits and reissue it at

4%. You'll anyway receive your full principal and interest earned so far. Usually banks
pay investors a premium of a 0.25 or 0.5% more on a callable CD for taking on the
risk on the callable CD.
Brokerage CD's
A CD sold through a brokerage is called a brokerage CD. Some banks get broker to
act as sales representatives to bring in investors who are willing to purchase CDs
from their banks. Brokerage CDs usually pay higher rates than CDs from local bank
because banks issuing brokered CDs contend in a national marketplace. One best
feature of these Brokerage CDs are these are more liquid than CDs issued by banks
because these can be traded just like bonds in the secondary market, but the catch
is there is no guarantee you won't face a loss. The only way to guarantee your full
principal amount and interest is to hold until maturity; these CDs often have call
options. These are also backed by the FDIC.
Role of Financial Market in the Economy- Certificate of Deposit
Type of economic system that exists in the United States
There are different types of economies that exist in the world
Command Economy or Central Planning where there is strong Government Control
Free Market Economy that is also called Capitalism. The US is often regarded as a
capitalistic system but it actually is a "Mixed Economy".
In the US there are many private players and hence there is a high degree of private
ownership and freedom but the economy is majorly controlled by the Government.
The current estimates indicate that the Federal Government is spending accounts for
up to 1/3rd of the economy. Before the Great Depression of the 1930's, United States
was mainly a free market, capitalist system and the role of the Government was
barely minimal during that period. Post the Great Depression of the 1930's there was
massive unemployment and widespread poverty made some to believe that
capitalism, as an economic system has failed. Economist John Maynard Keynes
revolutionized the economic thought process and a new system was proposed
"managed capitalism." Post the Keynesian revolution (it was reworking of the
economic theory where the concern was on the employment levels in the overall
economy) the US government started taking an active role in regulating the
economy. The nature of the government underwent a change and resulted in the
assumption of government's responsibilities. F.D Roosevelt created an economic
bill of rights that specified certain rights that were to be afforded to all sections.

These included the right to Housing, education and affordable health care. The
government assumed the responsibility to feed, house and educate its citizens.
United States has the World's largest economy. The US is the largest trading and
Manufacturing nation, World's wealthiest nation with per capita GDP of $48,450. The
US has the largest GDP at Purchasing Power Parity in the World. Though US economy
is a Mixed Economy it has maintained a high capital investment, moderate
unemployment rate and stable GDP rate. Around 60% of the Currency reserves
across the world have invested in the US Dollar. Around the 1970's a lot of emerging
economies and are closing the economic gap with the United States, this was mainly
as there was shift in Manufacturing industry of manufacturing goods where it was
made at a significantly lower cost post shipping cost to make higher profits.
Certificate of Deposit:
Under the Monetary Policy of the Federal Reserve System there are four types of
Deposit A/C's.
Savings Account - Accounts that are maintained by Retail financial institutions like
Banks ,Credit Unions, that pay interest but cannot be used directly as money as
a medium of exchange for e.g. by writing a check. For these accounts customers
normally set aside a portion of their liquid funds and earn a monetary return for the
same in the form interest income.
Checking Account- Under this type of account a deposit account held at a bank,
credit Union or any other financial institution, for the purpose of providing quick and
frequent access to funds of depositor on demand, through a array of different modes/
channels of transactions. Checking accounts are not for the purpose of earning
interest or for the purpose of savings. It is only used for the convenience of the
business or personal account hence do they tend not to bear any monitory benefit or
interest to the depositors. There is no cap on the number of deposit or withdraw
transactions subject to availability of funds in the account.
Money Market Account (MMA): Money market Account/deposit account (MMDA) is
an account that pays interest on current interest rates available in the money
markets. Money market accounts have relatively high rate of interest and require
a minimum balance (from $1,000 to $10,000 or $25,000) to avoid monthly fees or
earn interest. The investment strategy is similar to and meant to compete with
another market fund offered by another brokerage. These two types of account are
otherwise unrelated.

Certificate of Deposit - A Certificate of Deposit (CD) is a promissory note which the

bank issues. The banks which issue Certificates Of Deposit are commercial banks
which are insured by the Federal Deposit Insurance Corporation (FDIC). A Certificate
Of Deposit bears a maturity date, a specified fixed interest rate and can be availed
in any denomination. It is a time deposit that restricts depositors or buyers from
withdrawing funds on demand. Although it is possible if the buyer wants to
withdraw the money, this action will incur a penalty to the holder. The term of a CD
generally ranges from one month to five years.
A Sample Certificate of Deposit template
When the right CD is chosen it can yield a better ROI (Return on Investment) in
comparison to a Savings Account and also pays interest. Certificate of Deposit
carries the reputation as a secure place to grow and save money as you will never
have money lower than the deposit amount. During times of inflation there might be
scenarios when we can end up with less buying power when we compare the money
post the maturity end period. In an ideal scenario when the interest rate on
Certificate of Deposit is higher during the complete term than the rate of inflation.
But when the economy is volatile the inflation rate changes more quickly that the
rate banks pays on CD. During the period when the inflation is dropping, it is actually
beneficial for the CD as we tend to get a higher rate when inflation drops. During the
rising inflation, though the CD is stuck at lower rate as the inflation actually starts
eroding the buying power.
For e.g. in Mar 2011 US has an inflation rate of 2.68 %. As per the national survey
conducted by the rate of inflation actually erodes buying power, as per
national survey of financial institutions a 1 year CD had yield of 1.3%. For a
$1,00,000 in a CD would result in total of value $1,01,300 but based on the inflation
prevailing at that time you would require $1,02,680 to buy goods. Historically CD
rates have exceeded inflation but not during extremely high inflation rates or
immediately post recession since the interest rate would have gone down
1 Month Trend on National CD Rates
CD Term
APY (as of 5/31/12)
APY (as of 6/29/12)
APY Change
6 Months

12 Months
24 Months
36 Months
48 Months

60 Months
APY- Annual Percentage Yield
Financial advisors say that the reason behind the latest economic crisis is that
Americans have actually lost the art or forgot how to save. This lead to people falling
into debt mainly because they spent more than what their finances allowed.
The Federal Reserve (America's Central Bank) in the US is trying all possible ways of
not only preventing inflation but even the global depression. During the crisis that
banks had the Federal Reserve had made many innovative programs that actually
saw trillions of US Dollars of liquidity being pumped into the economy to keep the
banks alive/Solvent. Many in the financial world where actually worried that this
would create inflation immediately post the recovery stage of Global Economy. The
Federal Reserve developed an exit plan to close down the innovative program by
creating Certificate of Deposits to allow excess credit to Banks.
Regulatory Authority
FDIC (Federal Deposit Insurance Corporation) is an independent organization of the
United States established in the year 1933. Its role is to protect the funds that are
deposited in to the banks and savings associations since its inception no depositor
has lost any FDIC-insured funds. The FDIC insures against almost all the deposit
accounts including those of money market deposit accounts, certificates of deposit
(CDs), savings accounts and checking accounts.
The FDIC aim is to protect depositor's funds in the unlikely event of the failure of the
bank or savings institution. FDIC comes in and provides insurance, which guarantees
the safety of deposits in banks, for up to $250,000/depositor bank as of Jan 2012.
The FDIC also supervises and examines certain financial institutions for soundness
and safety, performs consumer-protection functions, and manages failed banks. FDIC
is again funded by premium that financial institutions and banks pay for insurance
coverage and also from the earnings on investments in U.S. Treasury securities.

Money market (MM) accounts and CD's are equally insured by the FDIC. The security
provided by FDIC ensures that deposits of up to $250,000 per customer are insured
by the government. There is no difference between the insurance provided by FDIC
for CD's and a money market account at an FDIC insured bank.
Historical Interest Rates for Certificates of Deposit
The first 150 years of US history saw the banking industry evolve, move from good
times to hard times as it experienced change and hard economic times. The severe
economic problems as a result of the Great Depression drove many banks to shut
their doors and moved them out of business. The federal government has to step in
and passed a series of laws to protect the investor's funds during the 1930s,
ensuring stability, financial backup, financial guidelines to banks and insurance to
deposits made by customers.
CD interest rates track the interest rates and the prime rate offered on the Treasury
securities. CDs were initially marketed during the 1960s. Interest rates on Treasury
instruments and securities were low for almost three decades, from the 1930s till the
1960s. Rates began crawling up as a result of inflation and recession that began in
the early 1960s. The average rate of one year or 12 month Treasuries securities rose
above 3% from 1962 forward. CD's interest rates also followed a similar path.
CD Rates from the early 1960s to 1980s
During 1960's average rate of 3 month CDs was around 4% and increased to 5.52 %
in 1967. Interest rates continued rising and by December 1969 the average rate on
3-month CDs was 7.76%. Interest rates finally began falling down in 1971, only to
rise again till October 1974 to 10.26 %. Interest rates continued to increase steadily
reaching a high of 16.48 % in September 1981. Those were years of high inflation
and huge recession following the War in Vietnam. It took years together before the
economy was stabilized by the government. Rates then declined just to be around
6% but remained above 6 % throughout the 1980s.
During the 1990s
By the end of the 1980s inflation eased out, and the economy improved as a result of
rapid expansion of globalization of American firms. 3-month CD rates declined to
below 5 % by 1991. But again rates began to rise again in late 1994 and remained
above 5% throughout most of the 1990s.
In the 2000s
During the early 2000's the whole world saw the stock market plunge, the attack in
the world trade centre and the worst economic crisis since the Great Depression.

Interest rates initially xdipped below 5% in March 2001 and continued to slide
downwards further. By Dec-2001 rates were below 2 % and remained in and around
the same level for about 3 years. Rates began rising again by the December 2004
and exceeded 5 % by June 2006. Then again in 2007 onwards recession took hold of
the country and by Jan 2008 rates fell down to 3.84 % and continued tumbling
downwards. Rates hit a low of 0.19 % in February 2010 and stayed below 0.5 %
through 2010.
Discussion of players, their profiles and objectives in the Market
Who issues certificates of deposits in US?
Certificates of Deposit are issued by retail financial institutions such as banks, credit
unions and savings loan corporations situated within the country in which they
operate. In US, funds deposited in CD's are protected up to a certain amount by the
FDIC when the CD is placed with a institution or bank which is a member of FDIC.

The list of companies which offers CDs in the US markets are listed below.
Description of CD
Ally Bank 1 Year CD Rates
1 year
The interest rate for the cd product 'high yield cd' is for a 1 Year Term which requires
no minim - USD - October, 2012
More Info
American Express Bank 1 Year CD Rates
1 year
The interest rate for this 12 month CD account is for a 1 year term requiring as much
as $1 minim - USD - October, 2012

More Info
Bank of America CD Rates
1 year
1 Year - 17 Month / 12 Month Rate is for the Standard CD/IRA Product and was ca USD - October, 2012
More Info
1 year
This IRA interest rate is for a term between 1 year to 17 months and is under the
'Standard CD/IR - USD - October, 2012
More Info
10 year
This applies for 10 Years and is for the Standard CD/IRA Product which was
calculated - USD - October, 2012
More Info
2 year
2 Year - 35 Month / 2 Year Rate is for the Standard CD/IRA Product and was
calculated - USD - October, 2012
More Info
3 month

90 - 179 Days / 3 Month Rate is for the Standard CD/IRA Product and was calculated
for - USD - October, 2012
More Info
5 year
This applies for the range from 5 Year to 119 months and is for the Standard CD/IRA
Product which - USD - October, 2012
More Info
6 month
180 - 364 Days / 6 Month Rate is for the Standard CD/IRA Product and was
calculated for - USD - October, 2012
More Info
Bank of China USA CD Rates
1 year
The following interest rate APY is for a 'Certificate of Deposit' account type, a 1 year
term and - USD - October, 2012
More Info
1 year
The minimum requirement/balance for the APY interest rate for this CNY currency 1
year CD term is - CNY - Oct, 2012

More Info
BBVA Compass CD Rates
1 year
This interest rate applies to the State of California - 'Southern California', please refer
to we - USD - October, 2012
More Info
Capital One CD Rates
6 month
Interest rates for capital one certificate of deposit is for a 6 month / 180 day period, it
also - USD - October, 2012
More Info
CHASE CD Rates CD Rates
1 year
Rate is for a deposit for 12 months with a $1,000 Minimum Opening Deposit from
90210 postcode - USD - October, 2012
More Info
2 year
Rate is for a deposit for 2 years with a $1,000 Minimum Opening Deposit - USD October, 2012

More Info
6 month
Rate is for a deposit for 6 months with a $1,000 Minimum Opening Deposit - USD October, 2012
More Info
Citibank CD Rates
1 year
12 month Rate is applicable for a state of California. - USD - October, 2012
More Info
2 year
2 Year Interest Rate was calculated for the state of California, other states may vary. USD - October, 2012
More Info
3 month
Rate was calculated for the state of California, other states may vary. - USD October, 2012
More Info
6 month

6 Month Interest Rate was calculated for the state of California, other states may
vary. - USD - October, 2012
More Info
Citizens BankCD Rates
2 year
The interest rate is for 24 months / 2 years and requires a minimum of a $1000. This
rate w - USD - October, 2012
More Info
Discover Bank CD Rates
1 year
The current interest for this CD product is for a 12 month term with a minimum of
$2,500 to open - USD - October, 2012
More Info
Fidelity CD Rates
1 year
The interest rate yield for this fixed income investment is for a 1 year period. Selected
from Fi - USD - October, 2012
More Info
Fifth Third Bank CD Rates
1 year

The current interest rate applies to the 'Standard CD' product and is for a 12 to 24
month CD ter - USD - October, 2012
More Info
Harris Bank CD Rates
1 year
The interest rate for this Harris certificate of deposit account is for a 1 year / 12
month period - USD - October, 2012
More Info
1 year
This interest rate is for '1 Year plus 1 day' / 12 month + 1 day with minimum balance
to open the - USD - October, 2012
More Info
ING Direct USA CD Rates
1 year
The Interest rate for this ING Direct 'Orange CD' Account is for a 12 month / 1 year
period - USD - October, 2012
More Info
Key Bank 1 Year CD Rates

1 year
The interest rate for this cd account was determined using a postcode for New York
and is for the - USD - October, 2012
More Info
MetLife Bank CD Rates
1 year
Interest Rate is for a deposit $100,000+ for a 12 month period - USD - October, 2012
More Info
2 year
Interest Rate is for deposit amounts of over $100,000 - USD - October, 2012
More Info
3 month
Interest Rate is for deposit amounts of over $100,000 - USD - October, 2012
More Info
6 month
Interest Rate is for deposit amounts of over $100,000 - USD - October, 2012
More Info

Navy Federal Credit Union 1 Year CD Rates

1 year
The interest rate indicated is for the 'Short-Term Certificate' product and is for a 1 y USD - October, 2012
More Info
PNC CD Rates
1 year
Rate is for 12 months with a minimum balance of a $1000 at a 'Fixed Rate CD Only'
for the state o - USD - October, 2012
More Info
2 year
Rate is for 2 years with a minimum balance of a $1000 at a 'Fixed Rate CD Only'
calculated in the - USD - October, 2012
More Info
3 month
Rate is for 3 months with a minimum balance of a $1000 at a 'Fixed Rate CD Only'
calculated in the - USD - October, 2012
More Info
6 month

Rate is for 6 months with a minimum balance of a $1000 at a 'Fixed Rate CD Only'
calculated in the - USD - October, 2012
More Info
Rabobank America 1 Year CD Rates
1 year
The interest rates for this CD requires a minimum of $2,500 and is for a time horizon
of 1 year ( - USD - October, 2012
More Info
Regions Bank 1 Year CD Rates
1 year
The interest rate is applicable for Houston, Texas and is for a 12 month/1 year time
frame. - USD - October, 2012
More Info
Sovereign Bank 1 Year CD Rates
1 year
This interest is determined from the 'rising rate cd' product and is for a 12 month
term, calculate - USD - October, 2012
More Info
TD Bank 6 Month CD Rates

6 month
Interest rate for Certificate of Deposit product requires a $250 minimum deposit for
the 'no catc - USD - October, 2012
More Info
Union Bank 1 Year CD Rates
1 year
The interest rate provided below was based on the CD product for a range between
12 to 17 months - USD - October, 2012
More Info
US Bank 1 Year CD Rates
1 year
This interest rate applies the 'Standard CD' product and is for a 12 month / 1 year
term and was - USD - October, 2012
More Info
USAA 1 Year CD Rates
1 year
This cd product is for a 12 month / 1 year period for a standard cd balance of $1,000
$94, - USD - October, 2012
More Info

Wells Fargo CD Rates

1 year
- Rate is for 'Standard CD Rates' for 1 year and applies for the state of California, it
also req - USD - October, 2012
More Info
3 month
3 Month Interest Rate was based on the standard cd rates product and calculated for
the state of - USD - October, 2012
More Info
6 month
6 Month Interest Rate was based on the standard cd rates product and calculated for
the state of - USD - October, 2012
More Info

Extent to liquidity
Access to Funds
With a money market account held at the bank, money can be withdrawn or
deposited whenever you would like. Although there are restrictions about maximum
no of withdrawals per quarter per account for a money market account, but the bank
in general cannot prevent you from withdrawing the deposited money. When it
comes to CD's, you are agreeing to deposit the money and keep it invested for a
certain time period. Generally you cannot withdraw or access the money invested in
a CD without incurring significant fees and penalties assessed by the respective
banks or financial institution from where the CD has be issued.

Though some CD's offer depositors the chance to withdraw their money from the CD
without inviting any penalty, for that facility you may have to maintain some
minimum balance in the account to get this privilege. The interest rate offered by
bank on a liquid CD is usually be higher than the bank's money market rate, but will
be lower than that of a traditional CD of the same term.
One of the biggest concern when taking liquid CD is how soon one will be able to
make a withdrawal after opening the account. Federal law recommends that the
money should stay in the account at least for 7 days before it can be withdrawn
without paying any penalty, but banks can set penalty on first withdrawal for any
period beyond that. One more consideration should be the number of withdrawals
allowed on these kinds of CD's. You should have to weigh the advantages of liquidity
against whatever return you're forgoing when compared to traditional term CDs.
Length of Investment
You can invest in a money market account for any amount of time say for a few
months to many years and are free to withdraw any time. With a CD you will have to
choose an investment term initially i.e when you opt for a CD. CD's term can be from
as small as 30 days to as much as 5 years or even 10 years. If you consider investing
in a long-term CD it is very important to consider the risks involved and also the
extent of liquidity available as the money will be locked up in the CD for that entire
Interest Rates
The accounts held at money market typically have floating interest rates. These
rates tend to fluctuate over time and can be adjusted by the financial institution on
quarterly or a monthly basis. These rates can vary according to current market
conditions prevailing at that time and you are not guaranteed any maximum or
minimum interest rate for the account. With a CD, interest rate is determined and
fixed at the time of initiation of CD and the same does not change for its life time.
Fees and Penalties
Usually money market accounts require a minimum or average balance on a daily or
monthly basis to avoid maintenance fees or minimum balance fees. In addition, the
banks usually do not charge any fees for any withdrawals during the period which
exceeds the maximum number of withdrawals. Also, one can withdraw all of the
money from the account at any time without penalty or loss of interest. With a CD,
an early withdrawal will lead to interest loss, this can vary from bank to bank but
commonly, banks charge around 3~6 months of accrued interest as penalty and
some banks may charge even more.

Innovative Products
Market linked CD's
Market linked CD's are also known as Equity linked CD's. Over the past 20 years, the
marketplace for investments has grown significantly as more and more investors
ranging from young couples to senior citizens have increasingly looked to these
investments opportunities to help address their objectives of wealth generation such
as generating regular income, pursuing growth opportunities, planning for their
retirement and protecting principal. Structured investments can take different forms
CDs, mutual funds, fixed deposits, registered notes to name a few. A common way in
which structured investments are made is in the form of Market-Linked Certificates of
Deposit (CDs). As compared to traditional CD's Market Linked CDs offer investors the
chance to earn extra returns.
Some of the companies which offer the market linked CD's in US are
Wells Fargo
Met life
Share Certificate
One of the innovations with CD's are Share Certificate CD's-it's secure, it's reliable,
and it's absolutely guaranteed to grow. Share Certificates of Deposits (also known as
CDs) usually have even higher yields than a regular savings account.
Advantages & Disadvantages of CD Accounts
CD's are one of the safest investment options available for investors. Firstly, they
carry the least risk among all higher yield investment options and are insured by
FDIC just like any other bank account. Also, using the CD Laddering strategy you can
change the maturity dates of your accounts and can have access to some portion of
your money.
Those were the advantages well; there are some serious disadvantages of investing
in CD's. The most obvious thing that if by chance you need liquidity on your money
before the maturity dates you will have to incur substantial penalty for withdrawing
early, this should be your primary concern. Make sure you ask questions such as how
much is the penalty involved, and how that will reduce your potential earnings in the

If you have not checked and compared the rates between credit unions and banks, it
would be really helpful for you to do so before locking your funds into CD's for any
length of time. But again, the higher your deposit, the higher interest you will
receive. However, you never know what you have in store for tomorrow, it's always
better to be prepared for a rainy day by making certain investments which will shield
you when required. As with any investment, make sure to read the fine print and
practice utmost care before making an investment decision.
Recent Trends in the Market
Americans once regarded Certificate of Deposit as one of the best investment tool.
CD's are also known as Time deposit account. The biggest benefit of CD's is usually
the high yield and low risk on investment. In the current market scenario CD's do not
offer the best yield or return in comparison to the other instruments around. There
are few institutions (Banks or Credit unions) in the market that still offer a better
than average rate in comparison to the Big Banks that offer 0.05%.
Due to the volatility in the market it is all about the confidence that businesses and
consumers need to have about the US economy before they see a significant
increase in the CD rate. The confidence effort game is being built by the Federal
Reserve Board but not too confidently. The Federal Reserve board meets and discuss
on action items that needs to be taken to grease the US economy. Economists feel
that the fragile economic recovery is part of the increasing rates.
Trend in the Market
Short Term
Long Term
Buyers are becoming extremely cautious in purchasing US Treasuries since there was
recent talk that UK might loose their AAA rating and if it will impact US and will US
loose the place of a risk free trading country.
No Change
Upward Trend
Since FDIC provides coverage to all CD's the end customer can be rest assured on
the guarantee of his money. Off late US Dollar has see a fall and that is something

that is a concern and will impact a majority of items and the commodity prices will
again move forward. Consumers who can take more risk are looking at Non hedged
short -intermediate-term international bond funds. It might be appealing to few since
the potential of gaining from a weak US Dollar and high foreign rates.
Upward Trend
On CD's, there is a good value that is being put in investment -grade corporate
bonds. The expected yield is between 4-6% on Maturity of most of the instruments
ranges from 6 months to 6 years. Consumers need to exercise caution and should
diversify their investment portfolio based on industry like financial, healthcare etc
rather than placing all their investment under 1 portfolio.
Based on the trends in the market there is very little change for having higher return
for short term investments. The yield curve is steeper and it indicates that the rates
will move higher. There is still attractive yields and opportunity if we don't mind
opening money markets or CD's.
For all major banks since the net interest margins are lower it put more pressure on
all deposit instruments and their yield.
When looking for a low or risk free investment for their hard-earned cash, many
Americans are currently turning to certificates of deposit (CDs). With recent market
volatility there has been lot of advertisement for Certificate of Deposits providing
some attractive yields options this generating considerable interest in CDs.

The SEC's Office of Investor Education and Advocacy has even issued an Alert to all
potential investors about the about the pros and cons of some high-yield CDs.
Though all CDs has federal deposit insurance, some are more complex and may
carry more additional risk, especially with respect to early refund of money or having
a an attractive locking interest rate.
Safety is key point of the traditional certificate of deposits sold by a banks or credit
union. Traditional CDs characteristically returns greater than the rates offered by
other insured investments, such as savings and checking. CDs are also available in a
variety of subscriptions, a range of features and investment schemes. Decision of the
depositor depends on the type of institution offering the certificate, the terms of the
deposit contract, the risk and service of the financial institution offering the deposit
and also the city where the offering institute located.
A minimum amount of deposit is required for deposits paying higher interest rates. A
penalty fee keeps investors away from withdrawing money from the account before
the agreed-upon date. Apart from the basic model CDs also come with many features
like brokered CDs, bump-up CDs, and callable CDs. CDs can be an investment
opportunity for long-term deposits, short-term deposits, conservative growth, income
generation, hedging, speculation and more.