Negotiable Cds 531o3b

Source 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

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Issue date

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Maturity date

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Amount of the deposit

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Rate of interest per cent per annum

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

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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 t 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 deposit. 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 investors. 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

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

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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. Characteristics 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 parcel. 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 with the larger investors and endeavour to market their NCDs to cover maturities and to accommodate new funds available. The banks also respond to 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)] where 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)

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The maturity date

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The settlement date

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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.

Source

Negotiable Instruments Plays A Major Role Introduction 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.  Statute  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 world

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 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 – payment.”

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 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 made.  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 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 . 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 . 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 functions  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 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 . 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 draft.

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 . A share warrant is also negotiable, because it es 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 ment, the company can communicate with the holders of bearer debenture. The holders of bearer debenture may exchange them for ed 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 ed 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 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 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 according to the wish of the purchaser.

Conclusion 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.

Bibliography 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 Walden 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

Source 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 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 s 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 istration for banks and credit unions respectively. CDs are different from saving s 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 cases. 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 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 is opened. 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 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 s 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.Â

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 - s 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 s customers normally set aside a portion of their liquid funds and earn a monetary return for the same in the form interest income. Checking - Under this type of a deposit  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 s 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 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 . Money Market (MMA):  Money market /deposit  (MMDA) is an that pays interest on current interest rates available in the money markets. Money market s 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 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 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 Bankrate.com 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 significantly. 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

0.37% 0.38% 0.01% 12 Months 0.53% 0.53% 0% 24 Months 0.71% 0.71% 0% 36 Months 0.92% 0.92% 0% 48 Months 1.11% 1.10% -0.01%

60 Months 1.36% 1.33% -0.03% 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 s including those of money market deposit s, certificates of deposit (CDs), savings s and checking s. 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 that financial institutions and banks pay for insurance coverage and also from the earnings on investments in U.S. Treasury securities.

Money market (MM) s 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 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 ed 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 CD’s in the US markets are listed below. Name Duration Rate Description of CD Ally Bank 1 Year CD Rates 1 year 1.04% 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 0.55% The interest rate for this 12 month CD is for a 1 year term requiring as much as $1 minim - USD - October, 2012

More Info Bank of America CD Rates 1 year 0.20% 1 Year - 17 Month / 12 Month Rate is for the Standard CD/IRA Product and was ca USD - October, 2012 More Info 1 year 0.20% 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 0.75% This applies for 10 Years and is for the Standard CD/IRA Product which was calculated - USD - October, 2012 More Info 2 year 0.35% 2 Year - 35 Month / 2 Year Rate is for the Standard CD/IRA Product and was calculated - USD - October, 2012 More Info 3 month

0.15% 90 - 179 Days / 3 Month Rate is for the Standard CD/IRA Product and was calculated for - USD - October, 2012 More Info 5 year 0.75% 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 0.15% 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 0.51% The following interest rate APY is for a 'Certificate of Deposit' type, a 1 year term and - USD - October, 2012 More Info 1 year 0.71% The minimum requirement/balance for the APY interest rate for this CNY currency 1 year CD term is - CNY - Oct, 2012

More Info BBVA Com CD Rates 1 year 0.50% 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 0.40% 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 0.25% 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 0.40% Rate is for a deposit for 2 years with a $1,000 Minimum Opening Deposit - USD October, 2012

More Info 6 month 0.20% 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 0.25% 12 month Rate is applicable for a state of California. - USD - October, 2012 More Info 2 year 0.30% 2 Year Interest Rate was calculated for the state of California, other states may vary. USD - October, 2012 More Info 3 month 0.15% Rate was calculated for the state of California, other states may vary. - USD October, 2012 More Info 6 month 0.15%

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 0.25% 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 1.00% 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 0.55% 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

0.25% 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 0.35% The interest rate for this Harris certificate of deposit is for a 1 year / 12 month period - USD - October, 2012 More Info HSBC USACD Rates 1 year 0.20% 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 0.50% The Interest rate for this ING Direct 'Orange CD' is for a 12 month / 1 year period - USD - October, 2012 More Info Key Bank 1 Year CD Rates

1 year 0.10% The interest rate for this cd was determined using a postcode for New York and is for the - USD - October, 2012 More Info MetLife Bank CD Rates 1 year 1.05% Interest Rate is for a deposit $100,000+ for a 12 month period - USD - October, 2012 More Info 2 year 1.17% Interest Rate is for deposit amounts of over $100,000 - USD - October, 2012 More Info 3 month 0.50% Interest Rate is for deposit amounts of over $100,000 - USD - October, 2012 More Info 6 month 0.70% 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 1.00% 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 0.20% 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 0.35% 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 0.07% 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

0.10% 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 0.30% 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 0.10% 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 0.20% 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 0.20% 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 0.30% 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 0.10% 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 0.86% 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 0.05% - 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 0.05% 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 0.05% 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 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 for a money market , 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 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 . Federal law recommends that the money should stay in the 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 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 period. Interest Rates The s 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 . 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 s 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 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, ed 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 HSBC 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 . Advantages & Disadvantages of CD s 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 . Also, using the CD Laddering strategy you can change the maturity dates of your s 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 end.

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 . 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 Scenario 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. Unchanged 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. Unchanged Unchanged 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. Unchanged Unchanged For all major banks since the net interest margins are lower it put more pressure on all deposit instruments and their yield. Down Down 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 ment 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. Conclusion 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 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 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.