What is a Certificate of Deposit?

A certificate of deposit, also known as a CD, is a short to medium term investment made with a bank or savings and loans institution.

The basic idea is that you agree to deposit a certain sum of money for a period of time, typically anywhere from three months to six years, in exchange for a locked interest rate.

This interest rate will generally be higher than that of a traditional savings account. After the length of the CD has expired, the initial balance will have increased substantially due to the accrued interest.

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