Certificate of deposit

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Certificates of deposit (or CDs) are debt instruments issued by banks and other financial institutions to investors. The investor is paid a set rate of interest in exchange for lending the institution money for a predetermined length of time. Maturities on certificates of deposit range from a few weeks to several years; the interest rate earned by the investor increases in proportion to the time his or her capital is tied up in the investment. [1]

Certificates of deposit are FDIC-insured for up to $100,000.

References

  1. In this Corner: Money Market vs. Certificate of Deposit. About.com.