Certificate of Deposit

A certificate of deposit is called a CD, and it is a receipt for for a deposit that is made for a clearly agreed period of time (and that is explicitly stated) and the rate of interest that will be paid against that deposit is usually fixed.

They are often issued by banks, and the length of the time deposit can vary greatly from a matter of literally days through to a period of many years. They have been a popular financial instrument over recent years, and count as a debt instrument.

Some types of certificates of deposit can be sold on in a secondary market before they mature, so they can be quite complicated. For those wishing to redeem them early there is usually some penalty such as only receiving a smaller amount of interest than there would have been at maturity and perhaps other penalties too.

Related Articles

Exposure
European Central Bank
Corporation
Lease
Call Option

More Financial Words and Vocabulary Explained