Certificates of Deposits : Certificates of deposits (CDs) represent short term deposits which are transferable from one party to another. Banks and financial institutions are the major issuers of CDs. The principal investors in CDs are banks, financial institutions, corporates, and mutual funds. CDs are issued in bearer or registered form. They generally have a maturity of 3 months to 1 year. CDs carry a certain interest rate.
CDs are a popular form of short-term investment for mutual funds and companies for the following reasons:
- Banks are normally willing to tailor the denominations and maturities to suit the needs of the investors.
- CDs are generally risk-free.
- CDs are generally offer a higher rate of interest than Treasury bills or term deposits.
- CDs are transferable.
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