A Certificate of Deposit (CD) is an ideal low-risk investment opportunity for investors interested in diversifying their portfolios. A CD allows investors to deposit large sums of money with banks or financial institutions and gain a higher rate of interest, especially when compared to a traditional savings account. Certificates of Deposit are also insured by the FDIC for up to $250,000, as opposed to other investment strategies that are not insured.
A CD requires the investor to place a fixed amount of money into the account for a specific amount of time; generally, the time periods are three months, six months, one year,
Once investors purchase a CD, they are locked into specific interest rates for certain amounts of time, regardless of whether or not interest rates rise overall in the market. Typically, CDs pay out a fixed interest rate, but financial institutions have may offer CDs with variable interest rates or with long-term agreements that offer a higher yield.
If you are interested in investing in a Certificate of Deposit or are currently investing in a CD, take this quiz to see if you should be satisfied with your current CD rates.