Certificate of Deposit

Archive for March, 2006

A Certificate Of Deposit or CD offers investors with limited resources a convenient form of investing their short term funds. A Certificate Of Deposit can be bought through banks and thrift institutions for small amounts and specified periods. But, exactly what is a Certificate Of Deposit?

What is a Certificate Of Deposit?

A Certificate Of Deposit is an IOU in that there is a promise to pay back the interest and principal at maturity to the holder of the Certificate Of Deposit. But, a Certificate Of Deposit is not a marketable instrument. In another word, if the holder of the Certificate Of Deposit needs the funds or money tied up in the Certificate Of Deposit before the maturity of the Certificate Of Deposit, then there is no market of buyers of certificates of deposit.

What if I want to cash out my certificate of deposit before maturity?

If the certificate of deposit holder wants to cash out his or her certificate of deposit earlier than the maturity of his or her certificate of deposit, he or she would have to go back to the financial institution that issued the certificate of deposit. The holder of the certificate of deposit will have to pay an early redemption fee or redemption penalty to cash out the certificate of deposit (CD).

Example of what is a certificate of deposit & How does a Certificate of Deposit Work

How does a Certificate of Deposit Work can be demonstrated through the following example of certificate of deposits. For example, a certificate of deposit investor might decide to invest $500 in certificates of deposit in the bank and the bank promises to pay the investor $510 at maturity in 6 months.

Certificate Of Deposit Vs Bond / Is a certificate of deposit a bond?

A certificate of deposit has many properties of a bond, but a certificate of deposit is not a bond.

Montgomery County Treasurer-Unclaimed Funds

Question: IRAs – Types, Conditions, and Investments?

First of all, I know some of the general facts. Roth IRAs are taxed when money is deposited, while Traditional IRAs are taxed when money is withdrawn. I know that there is a maximum income(?) limit for Roths, while there is a minimum contribution for Traditionals.

I wish to start one soon. I am young, starting college, and no job, as of yet. I have enough $ to start a Roth or Traditional IRA, but I have no credit. I am also (vaguely) aware of an IRA Certificate Of Deposit (CD), which could work out too.

There are several questions:
1) Can I have more than one?
2) Can they be easily transferable?
3) Other than previously mentioned, what other types of IRAs could work for me? What are the differences?
4) Which one is suitable from the previous information (Roth, Traditional, CD, other)
A) Why (not)?
B) Am I subject to default investments , or can I choose types (stocks and bonds, mutual funds, CDs, Money Market accounts,…) , and companies (Yahoo!, Google, MSN, AOL,…)?

Answer: You can have a traditionals and a Roth IRA… But the total contribution per year combined can only be $4,000… You can have IRA’s in multiple places, i.e. at mutual funds,brokerages, and banks, among other places. When you say, “Roth IRAs are taxed when money is deposited”, that’s not really the case… I know what you mean. It’s money that was taxed when you earned it, but it’s not actually taxed upon contribution to your Roth.

Here’s your answers:

1) Yes, see above
2) You can convert traditional into Roths, and recharacterize back to traditionals. Converting to Roths is easy… Recharacterizing to tradionals can make your 1040 tricky.
3) Pretty much its a traditional or Roth.
4) In the long run, Roths are a better deal because you save taxes in the future…. In the short run, traditionals are good because you get an immediate tax deduction.
a) I would recommend a Roth because you will save much more on taxes in the long run.
b) Depends on where you open… If you open it with a mutual fund company, you will be limited to that company’s funds. If you open it with Etrade or TD Ameritrade, you will be able to choose from thousands of mutual funds and thousands of stocks.

Getting Organized