What Is Certificate of Deposit (CD)? Meaning & Example
Definition
A certificate of deposit is a savings product that pays a fixed rate for a fixed term. Withdrawing early usually triggers a penalty.
Related terms
A high-yield savings account pays a higher interest rate than a typical savings account, often from online banks. It is a popular home for emergency funds.
APY (Annual Percentage Yield)APY is the yearly return on savings including the effect of compounding. It is useful for comparing savings accounts and CDs.
BondA bond is a loan you make to a government or company in exchange for regular interest payments and the return of principal at maturity. Bond prices tend to fall when interest rates rise.
What is Certificate of Deposit (CD)?
A certificate of deposit is a savings product that pays a fixed rate for a fixed term. Withdrawing early usually triggers a penalty.
Can you give an example of Certificate of Deposit (CD)?
A 12-month CD paying 4% on $5,000 would earn about $200 by the end of the term.