Certificate of Deposit (CD)
Also called: CD, term deposit, fixed deposit
A CD is a deposit locked with a bank for a fixed term — three months to five years — in exchange for a fixed interest rate. You're paid for giving up access: break it early and you typically forfeit three to twelve months of interest. Because the rate is fixed, a CD is a bet on rates falling; if they rise you're stuck below market. A CD ladder (equal amounts maturing each year) hedges that by rolling a slice at the new rate every year.
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