Certificate of Deposit Account
Certificate of Deposit Account Glossary Definition
Certificate of Deposit Account.
(1) Bank certificate of deposit. Negotiable certificates of deposit issued by banks with maturities between 30 and 360 days usually enjoy excellent marketability if they are traded in the national money markets, otherwise not. The minimum purchase is $100,000 and interest accrues at the coupon rate and is paid at maturity-yields fluctuate to reflect changes in Federal Reserve policy. Only the CD's of the nation's top money center banks are marketable and are sold at a net price by dealers who are market makers. Maturities can be tailor made to suit requirements. Similar securities exist in other developed money markets.
(2) Ordinary certificate of deposit. A written certification by a bank or a savings and loan association that a fixed dollar amount has been deposited with it for a fixed period of time at a predetermined rate of interest. Certificates are registered in the name of the depositor (fund) and are issued in negotiable and non-negotiable forms. A CD can be issued in any denomination with a duration up to five years. Should the depositor/fund have need for the money before the expressed maturity, a negotiable certificate frequently can be sold to certain money brokers at the then existing money rate. Also called a time deposit.
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