Callable Certificate Of Deposit
Definition of 'Callable Certificate Of Deposit'An FDIC insured certificate of deposit (CD) that contains a call feature similar to other types of callable fixed-income securities. Callable CDs can be redeemed (called away) by the issuing bank prior to their stated maturity, usually within a given time frame, and at a preset call price. |
|
Investopedia explains 'Callable Certificate Of Deposit'A bank adds a call feature to a CD so it does not have to continue paying a higher rate to the CD holder if interest rates drop. Callable CDs are often redeemed at a premium to their purchase price as an incentive for investors to take the call risk.For example, if a bank issues a traditional CD that pays 4.5% to the investor, and interest rates fall to a point where the bank could issue the same CD to someone else for only 3.5%, the bank would be paying 1% higher rate for the duration of the CD. By using a callable CD, the bank can pay a premium to stop paying the higher rate. |
Related Definitions
Articles Of Interest
-
Callable Bonds: Leading A Double Life
Find out more about these dangerous and exciting cousins to regular bonds. -
Are CDs Good Protection For The Bear Market?
Certificates of deposit promise stable income in any market, but do they deliver? -
Bond Call Features: Don't Get Caught Off Guard
Learn why early redemption occurs and how to avoid potential losses. -
Callable CDs: Check The Fine Print
These offer higher returns than regular certificates of deposit, but there's a catch. -
Certificates Of Deposit
Safety is a hallmark of the traditional certificate of deposit (CD) sold by a bank or credit union. -
What are the risks of investing in a bond?
The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates rise. By buying a bond, the bondholder has committed to receiving a fixed ... -
Advanced Bond Concepts
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration. -
The Basics Of The T-Bill
The U.S. government has two primary methods of raising capital. One is by taxing individuals, businesses, trusts and estates; and the other is by issuing fixed-income securities that are backed ... -
Will 2014 Mark The Return Of The CD?
If bank rates follow the pattern that yields in the bond market have already begun to set, CD rates may be the first deposit rates to benefit from rising interest rates. -
Introduction To Commercial Paper
Commercial paper is a short-term instrument that can be a viable alternative for retail fixed-income investors looking for a better rate of return on their money.
Free Annual Reports