Certificate of deposit (CD)

A certificate of deposit is a term bank deposit with a fixed duration and stated interest rate. A CD is essentially a promissory note issued by a bank. A certificate of deposit normally pays a fixed interest rate upon maturity, though some variable-rate versions are available. A more restrictive CD may require an early-withdrawal penalty.

There is a perception that CDs are more secure than commercial paper, since CDs are issued by banks, which are more closely regulated than companies. There is a capped amount of Federal Deposit Insurance Corporation (FDIC) insurance coverage of this investment.

Related Courses

Corporate Cash Management 
Corporate Finance 
Treasurer's Guidebook