A short term investment, the certificate (CD) is evidence of the deposit of funds at a commercial bank for a specified period of time and at a specified rate of interest. The most common denomination is $100,000, so its appeal is limited to large investors. Money market banks quote rates on CDs; these rates are changed periodically in keeping with changes in money market rates. Yields on CDs are greater than those on treasury bills and repose and about the same as those on banker’s acceptances and commercial paper. Original maturities of CDs generally range from 30-360 days. A good secondary market has developed for the CDs of the large money market banks; default risk is that of the bank rating. Like bankers acceptances, corporations buy domestic as well as CDs of large foreign banks. The latter is known as “YANKEE” CDs, and they typically carry a higher expected return.

Advertisement

 

Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to [email protected]
7 Comments

Leave a reply

BMS.co.in is aimed at revolutionising Bachelors in Management Studies education, also known as BMS for students appearing for BMS exams across all states of India. We provide free study material, 100s of tutorials with worked examples, past papers, tips, tricks for BMS exams, we are creating a digital learning library.

Disclaimer: We are not affiliated with any university or government body in anyway.

©2020 BMS - Bachelor of Management Studies Community 

A Management Paradise Venture

Ask Us On WhatsApp
or

Log in with your credentials

or    

Forgot your details?

or

Create Account