Certificate of Deposit

Archive for August, 2007

Connecticut Punk Rock Song

Question: Money Market account to a CD?

Concerning all the turmoil in the financial market I’m concerned about the safety of about 350 K in a MM account

Answer: A Money Market account is secured with the securities it’s invested in (usually short term, safer, insturments). The problem with a MM is that on occasion (although rare) it can “break the buck”….what that means is that the NAV can g below $1dollar and you loose principal and then everyone starts taking their money out of the MM (thus having liquidity risk).
A CD is secured by a guarantee of the Bank it’s held in. $100K is insured by the FDIC and anything above that is not.

CNBC “Power Lunch” 8/21/07 – Money Market Safety

Question: How to calculate interest on a Certificate Of Deposit?

How do you calculate how much interest you will earn from your Certificate Of Deposit (CD)? What I keep doing is wayyy off. Just want to know how to do it. Thanks.

Answer: What you are asking is the interest value of a single Payment at a given interest Rate compounded x times per year for n years.

INT= P * ((1+R/x) ^ (n * x) -1)

Personal Finances & Money Management : How to Dematerialize an Existing Certificate Of Deposit