I was just checking the CD's that INGDirect offers. Why do shorter term CDs such as 6, 9 and 12 month CD yeild a greater interest rate than the longer term CDs such as 48 and 60 month ones? Shouldn't it be the other way around?
2007-03-16 15:58:25 · 5 answers · asked by jkt610 2 in Business & Finance ➔ Investing
Rates can be inverted based on inflation expectations. Rates should head up after this latest round of reports. Should not be buying cds anyway. Guranteed to lose purchasing power after taxes an inflation.
2007-03-16 16:21:25 · answer #1 · answered by vegas_iwish 5 · 1⤊ 0⤋
Because the companies know what the interest rates are in the NEAR future they can afford to give us a little more interest since THEIR RISK is low in losing.
But when they speculate long -like 5 years -so many ups and downs could put those companies in a losing proposition if they guess wrong. So they don't guess much when rates start getting higher in the short term such as now.
2007-03-16 23:32:41 · answer #2 · answered by Brick 5 · 0⤊ 0⤋
You would think so, but I think the reason they don't always work out like that is because the interest rates are always changing. They don't want to lock you into a high rate for 5 years, for example, if for the last 2 years of that time the interest rates drop by a lot. That being said, I really don't understand why they would even offer them or why anyone would sign up for a longer term CD when the rates are lower than short term ones.
2007-03-16 23:04:09 · answer #3 · answered by k_hart100 3 · 0⤊ 1⤋
interest rates fluctuate. Think this through today the rate pays 10% and perhaps after every 6 months for the next 5 years the rates will go down 1%. Do you place your money here or do you take a 5 year certificate which pays 7.5%. See you got to do the math and you have to believe my example will be proven reality.
Mortgage rates starting in 1970's were 8% they went up to near 15% and down to 5%. Depending on when you purchased your home you probably re-mortgage your existing home dictated by your needs and at the then current interest rates.
2007-03-17 02:02:20 · answer #4 · answered by Anonymous · 1⤊ 0⤋
Inverted Yield Curve
When short term rates are higher than long term rates it's called an "Inverted Yield Curve". This is a function of the market...... not ING.
It has (in the past) been a warning sign (sometimes) for a recession.
BTW: There are other banks paying consistently higher rates than ING. One of them is www.GMACBank.com. FDIC insured and more "services" available on standard savings accounts (ATM fee free card, checks etc).
2007-03-16 23:24:42 · answer #5 · answered by Common Sense 7 · 1⤊ 0⤋