Definition of Certificate of deposit (CD)

Certificate of deposit (CD)

Also called a time deposit, this is a certificate issued by a bank or thrift that
indicates a specified sum of money has been deposited. A cd bears a maturity date and a specified interest
rate, and can be issued in any denomination. The duration can be up to five years.

Certificate of Deposit (CD)

A bank deposit that cannot be withdrawn for a specified period of time. See also term deposit.

American Depositary Receipts (ADRs)

certificates issued by a U.S. depositary bank, representing foreign
shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may
represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's
are "sponsored," the corporation provides financial information and other assistance to the bank and may
subsidize the administration of the ADRs. "Unsponsored" ADRs do not receive such assistance. ADRs carry
the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American depositary shares(ADSs) are
a similar form of certification.

Bull CD, Bear CD

A bull cd pays its holder a specified percentage of the increase in return on a specified
market index while guaranteeing a minimum rate of return. A bear cd pays the holder a fraction of any fall in
a given market index.

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Demand deposits

Checking accounts that pay no interest and can be withdrawn upon demand.

Depository transfer check (DTC)

Check made out directly by a local bank to a particular firm or person.

Depository Trust Company (DTC)

DTC is a user-owned securities depository which accepts deposits of
eligible securities for custody, executes book-entry deliveries and records book-entry pledges of securities in
its custody, and provides for withdrawals of securities from its custody.

Electronic depository transfers

The transfer of funds between bank accounts through the Automated
Clearing House (ACH) system.

Equipment trust certificates

certificates issued by a trust that was formed to purchase an asset and lease it
to a lessee. When the last of the certificates has been repaid, title of ownership of the asset reverts to the
lessee.

Euro CDs

cds issued by a U.S. bank branch or foreign bank located outside the U.S. Almost all Euro cds
are issued in London.

Eurocurrency deposit

A short-term fixed rate time deposit denominated in a currency other than the local
currency (i.e. US$ deposited in a London bank).

Federal Deposit Insurance Corporation (FDIC)

A federal institution that insures bank deposits.

GMCs (guaranteed mortgage certificates)

First issued by Freddie Mac in 1975, GMCs, like PCs, represent
undivided interest in specified conventional whole loans and participations previously purchased by Freddie Mac.

International Depository Receipt (IDR)

A receipt issued by a bank as evidence of ownership of one or more
shares of the underlying stock of a foreign corporation that the bank holds in trust. The advantage of the IDR
structure is that the corporation does not have to comply with all the regulatory issuing requirements of the
foreign country where the stock is to be traded. The U.S. version of the IDR is the American depository
Receipt (ADR).

Lock-up CDs

cds that are issued with the tacit understanding that the buyer will not trade the certificate.
Quite often, the issuing bank will insist that the certificate be safekept by it to ensure that the understanding is
honored by the buyer.

MBS Depository

A book-entry depository for GNMA securities. The depository was initially operated by
MBSCC and is currently in the process of becoming a separately incorporated, participant-owned, limitedpurpose
trust company organized under the State of New York Banking Law.

Negotiated certificate of deposit

A large-denomination cd, generally $1MM or more, that can be sold but
cannot be cashed in before maturity.

Project loan certificate (PLC)

A primary program of Ginnie Mae for securitizing FHA-insured and coinsured
multifamily, hospital, and nursing home loans.

Savings deposits

Accounts that pay interest, typically at below-market interest rates, that do not have a
specific maturity, and that usually can be withdrawn upon demand.

Security deposit (initial)

Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as
part payment or purchase. Related: margin

Security deposit (maintenance)

Related: Maintenance margin security market line (SML). A description of
the risk return relationship for individual securities, expressed in a form similar to the capital market line.

Strip mortgage participation certificate (strip PC)

Ownership interests in specified mortgages purchased
by Freddie Mac from a single seller in exchange for strip PCs representing interests in the same mortgages.
Stripped bond Bond that can be subdivided into a series of zero-coupon bonds.

Time deposit

Interest-bearing deposit at a savings institution that has a specific maturity.
Related: certificate of deposit.

Variable rate CDs

Short-term certificate of deposits that pay interest periodically on roll dates. On each roll
date, the coupon on the cd is adjusted to reflect current market rates.

Yankee CD

cd issued in the domestic market, typically New York, by a branch of a foreign bank.

Stock certificate

A document that identifies a stockholder’s ownership share in a corporation.

Demand Deposit

A bank deposit that can be withdrawn on demand, such as a deposit in a checking account.

Deposit Creation

The process whereby the banking system transforms a dollar of reserves into several dollars of money supply.

Deposit Switching

Central bank switching of government deposits between the central bank and commercial banks.

Multiple Deposit Creation

The process whereby the money multiplier operates.

Notice Deposit

See term deposit.

OECD

Organization for Economic Cooperation and Development, consisting of most of the world's developed economies.

Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.

Time Deposit

See term deposit.

Direct Deposit

The direct transfer of payroll funds from the company bank account
directly into that of the employee, avoiding the use of a paycheck.

Canadian Deposit Insurance Corporation

Better known as cdIC, this is an organization which insures qualifying deposits and GICs at savings institutions, mainly banks and trust companys, which belong to the cdIC for amounts up to $60,000 and for terms of up to five years. Many types of deposits are not insured, such as mortgage-backed deposits, annuities of duration of more than five years, and mutual funds.

direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service. For example, you can arrange with your employer to have your pay cheques automatically deposited into your no fee bank account.

guaranteed investment certificate (GIC)

A GIC is an investment that gives you a guaranteed rate of return over a fixed period of time, usually between 30 days and 5 years. GICs are available from banks, trust companies, and other financial institutions.

pre-authorized direct deposit

A system where funds are electronically credited to your account by a financial institution or a payroll service.

Guaranteed Interest Certificate (GIC)

Interest bearing investment with fixed rate and term.

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