Certificates of Deposit

Matthew Meheula

Certificates of Deposit

(CD) a certificate issued by a bank to a person depositing money for a specified length of time.

Investing Safe investors would invest in this because it is relatively safe method of earning money. Although, if you wish to take your money out before the time expires, you will possibly face a substantial penalty. CD’s are government insured and virtually risk-free! The limit there is to this type of account is that once you sign your money off to it, it is stuck there for a given amount of time unless you wish to take a penalty on withdrawal.

Money Making

• You make money on this investment through interest gained from keeping the money tied up in the CD.For example you gain 5% every year for 5 years on a certain amount of money.

So if you invest $10,000 in a 1-year CD, you could possibly make up to $500 for a

total of $10,500

Economic Climate

• The best economic climate for Certificates of Deposit is for it to remain stable, or the value of the dollar increases. For example, if inflation occurs, the value of the dollar goes down and causes the money tied up in the CD to go down.

Obtaining a Certificate of Deposit

• A CD can be obtained commonly from Banks, Thrift institutions, and Credit Unions.

• The best amount to start an investment in a CD is anywhere over $1,000, but any with any amount you can start a CD.

Risks

• The only risk you run under investing in a Certificate of Deposit is that inflation may cancel out the interest you are receiving.

• For example, if your CD has a 7% interest rate but then the value of the dollar inflates 7%, they cancel each other outThe government will insure you up to $250,000.

Graphs and Links

Earnings of a CD throughout years 1994-2008

Certificate of Deposit Popularity 1965-Present

http://www.investopedia.com/terms/c/certificateofdeposit.asp

http://www.bankrate.com/cd.aspx

http://www.fdic.gov/deposit/deposits/certificate/

http://money.howstuffworks.com/personal-finance/budgeting/certificates-of-deposit.htm