Investments, tenth edition

  Certificates of Deposit 

 A     certificate  of  deposit,      or CD, is a time deposit with a bank. Time deposits may not be 

withdrawn on demand. The bank pays interest and principal to the depositor only at the 

end of the fixed term of the CD. CDs issued in denominations greater than $100,000 

are usually negotiable, however; that is, they can be sold to another investor if the owner 

needs to cash in the certificate before its maturity date. Short-term CDs are highly market-

able, although the market significantly thins out for maturities of 3 months or more. CDs 

are treated as bank deposits by the Federal Deposit Insurance Corporation, so they are cur-

rently insured for up to $250,000 in the event of a bank insolvency.