Certificate of deposit (CD) is offered by n=most of banks and
credit unions. CD provides a fixed rate of return for placing a
term deposit for predetermined time period.
Advantage of
CD:
- CD is a safer investment with no
volatility. It avoids any loss which is associated with equity or
debt instruments. It provides fixed rate of return decided at
inception.
- CD offers higher interest rate than
savings account or money market instruments.
- CD product is offered by almost all
banks and credit unions. So have various options to get CD
with.
Disadvantage:
- CD comes with maturity period and
can not be withdrawn before maturity. An early withdrawal attracts
penalty.
- CD provides fixed rate of return ,
even if interest rate increases in market.
- CD usually provides lesser return
than the equity of debt securities.