Certificates of Deposit (CDs) - Hilliard Lyons

Certificates of DepositCertificates of Deposit (CDs) are simply deposited funds that earn acontractual rate of interest over a specified period of time. Investors agree tolend money to a bank for a fixed period of time and, in return, they receive astated rate of interest, paid in various installments, over the life of that “loan”.Because investors give up the right to withdraw their money at any time, theyreceive a higher interest rate than on demand accounts, such as savings ormoney market accounts.CDS AREN’T AVAILABLE ONLY THROUGH BANKSBrokered CDs arebacked by the full faithand credit of the U.S.Government through theFederal Deposit InsuranceCorporation (FDIC).Numerous banks use brokerage firms, such as Hilliard Lyons, to help findinvestors for their CDs. Certificates obtained in this manner are referred to asBrokered CDs. Like certificates purchased at a bank, or any other bank deposit,Brokered CDs are backed by the full faith and credit of the U.S. Governmentthrough the FDIC.Brokered CDs are traded in the secondary market, which provides anopportunity for investors to sell their certificates at the prevailing market levels,which may be worth more or less than the original amount invested.BROKERED CD ADVANTAGESWider selection of issuersThrough Brokered CDs, investors have access to certificates from manyinstitutions across the country. Investors can choose from a wide selection ofmaturities, coupon frequencies and yield to find the appropriate certificatesbest suited to their particular investment requirements.FDIC CoverageThe basic insurance amount is $250,000 per depositor per insured bank.Investment Insightfor Every GenerationSince 1854 sm

Certificates of Deposit - page twoEstate FeatureThis provision allows for the full withdrawal of the principal and interest (upto the FDIC cap of $250,000) in the event of the death or adjudication ofincompetence of the beneficial owner, regardless of whether the current marketvalue has fallen. It is important to note that very few fixed-income investmentoffer this attractive feature.TYPES OF CERTIFICATES OF DEPOSITFixed-Rate/Fixed-Date CDsThe most basic type of Brokered CD has a fixed maturity date. Maturitiesgenerally range from three months to ten years.Callable Certificates of DepositCallable Certificates of Deposit are CDs that can be called by the issuing bankprior to maturity. With Callable certificates, banks reward CD investors with ahigher rate of interest in return for the right to pay back the investor’s principalprior to the stated maturity date. The non-call, or “lockout” period, (the timeduring which an issuer cannot call the CD) is usually three months to one year.Step-Up CDsThe Step-Up CD is typically issued only in Callable form. It provides a variationon the Fixed-Rate CD by offering a predetermined schedule of coupon rates,which begin somewhat below that of current Fixed-Rate CDs and graduallyincrease over a specified time frame. The coupon may step-up only once or asoften as annually until the issuer calls the certificates or when the certificatematures. Step-Up CDs generally attract investors with expectations of graduallyrising interest rates.Securities offered through J.J.B. Hilliard, W.L. Lyons, LLC | Member NYSE, FINRA & SIPC.Hilliard Lyons does not offer tax or legal advice. Please consult your tax advisor or attorney before making any decision that may affect your tax or legal situation.©2009 All rights reserved. Revised 1/14.www.hilliard.com