Certificates of deposit

What Are Certificates of Deposit $($CDs$)$ and How Do They Work?

Certificates of deposit $($CDs$)$ offer higher interest rates than could be earned on either a negotiable order of withdrawal $($NOW$)$ account or a stat $($passbook$)$ savings account.

Depending upon the preferences of the financial institution at the time, savers can purchase CDs that will carry either a fixed or an adjustable rat interest. CDs can also be purchased from depository or some non$-$depository institutions, and may or may not be protected by deposit insurance, depending on the nature and terms of the account.

To protect yourself from unwanted surprises, it is I$-$ritical that you ask questions of the institution that issues a CD that you purchase and know the exact characteristics and terms of any $CD$ in which you invest. Not all $CDs$ are alike.

There are two major classes of CDs: fixed$-$rate and variable$-$rate instruments. How do they differ?

A fixed$-$rate $CD$ is characterized by an interest rate that $$ an interest rate that $$ during its life. over the life of the investment, while a variable$-$rate CD carries