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An instrument recording money placed with an issuing institution for repayment under agreed maturity and interest terms.
Save conceptA certificate of deposit records money placed with an issuing institution under agreed repayment and interest terms. The institution promises to repay according to those terms. The maturity date identifies when repayment becomes due. The name appears both in ordinary bank savings products and in central-bank securities, so the issuer and contract must be identified before treating different products as equivalent.
The contract sets the , payment dates and treatment of early access or transfer. A fixed rate stays as specified for the relevant term. An annual describes a yearly basis, even when the instrument lasts for a shorter period. Some securities are issued through auctions, where the price is determined by bids. The stated and the price paid therefore answer different questions.
Suppose an institution issues a certificate that matures after a short agreed period and pays interest on that date. The buyer places money with the issuer and receives the contractual repayment when it matures. If the quoted is annual, the interest for the short term must use the relevant fraction of a year and contract rules. It is not automatically the entire annual percentage. This example is hypothetical and supplies no current investment return.
The SEC’s US retail guidance describes deposit insurance for qualifying insured bank products. That protection should not be transferred to a different country or a central-bank security merely because it also uses the name certificate of deposit. Check the issuer, legal form, access restrictions, taxes and payment provisions. A stated is also different from a guaranteed resale price before maturity.
BOJ schedules J$37 billion certificate-of-deposit auction for October 14