I have been looking at different investment ideas and I recently came across the short term CDs. What really bloggled my mind was the 7-28 CDs. I was wondering what is the point of them? Also I was wondering if a 7-28 Day CD pays, let's say, 1% interest could I then open a new CD when the previous one matures and reinvest it plus the interest and then make it 2% with that short amount of time? Or is my thoughts on how CDs work flawed?
2006-06-26 12:25:51 · 5 answers · asked by Frankie C 2 in Business & Finance ➔ Investing
The interest rate is usually expressed on an annual basis. So you don't earn 1% for that, say, month - you really earn 1/12% if the annual rate is 1%. I doubt you will find a CD paying 1% for each month in the current financial climate.
In taking out a 7-28 day CD, you're earning probably more interest on the funds than if you kept them in your checking account. So if you know you won't need to draw on the money, that could be a reason to take out the short-term CD. Plus it would keep your hands off of it. :o)
2006-06-26 12:30:14 · answer #1 · answered by Anonymous · 1⤊ 0⤋
It's probably used by mutual funds and stock pickers when the market goes south. Just sell the stocks, buy short term CD, wait till the market crashes and jump in and buy. The difference between that and a money market, is that a money market is technically not guaranteed.
2006-06-26 17:04:58 · answer #2 · answered by gregory_dittman 7 · 0⤊ 0⤋
The interest rate on a CD is an annual rate, so for such a short term you'd only earn a small fraction of that.
2006-06-26 12:30:29 · answer #3 · answered by mockingbird 7 · 0⤊ 0⤋
Liquidity. You can get at your money quickly if needed.
2006-06-26 13:04:23 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 0⤋
NO POINT
2006-06-26 13:24:54 · answer #5 · answered by sueme 1 · 0⤊ 0⤋