What is that & how does it work?
2007-11-14 14:09:51 · 2 answers · asked by Anonymous in Business & Finance ➔ Investing
A CD is a Certificate of Deposit. You can decide how long you want to put your money in this savings vehicle and lock in an interest rate for that amount of time. It's a good idea to do this soon after the Fed has lowered the Fed Funds Rate because that means interest rates will soon fall as well. By locking in a fixed rate for a longer period of time, you may be able to ride out the lower interest rates and get a very competitive rate.
However, there are monetary penalties to removing money from a CD before the designated maturity date. You have to be prepared to let this money go untouched for the entire time it is in the CD.
A CD is insured by the FDIC which means you can't lose the money in a CD even if the bank goes under. The government will return all your money to you. It's 100% safe. The only drawback is really that you can't touch it.
Good luck investing!
2007-11-14 14:44:30 · answer #1 · answered by Anonymous · 1⤊ 0⤋
It is a Certificate of Deposit.
People with money can agree to deposit a certain amount of money in a bank for a fixed period of time. They are then guaranteed a decent interest rate.
The bank can then turn around & sell the deposit to another bank or money market fund in order to get cash if they need it.
2007-11-14 22:16:47 · answer #2 · answered by Ranto 7 · 1⤊ 0⤋