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Certificate of Deposit

Table of Contents
Certificate of Deposit.................................................................................................................2

Introduction...............................................................................................................................2

Purpose......................................................................................................................................2

Usage.........................................................................................................................................3

Certificate of Deposit by UBL...............................................................................................3

Advantage of Certificate of Deposit (CD).................................................................................4

Problems....................................................................................................................................4

Conclusion.................................................................................................................................5

References.................................................................................................................................6

References

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Certificate of Deposit

Certificate of Deposit

Introduction
A certificate of deposit (CD) is a time-deposit investment with a specific maturity
date, which can range from as short as one month to five years or longer.
It is an interest-bearing, debt instrument offered by financial institutions with
maturities ranging from short-term to long-term.
It is a savings certificate entitling the bearer to receive interest. A CD bears a
maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are
generally issued by commercial banks and are insured by the FDIC. The term of a CD
generally ranges from one month to five years. CDs offer comparable rates of return on
investment with low risk.
A certificate of deposit is a promissory note issued by a bank. It is a time deposit that
restricts holders from withdrawing funds on demand. Although it is still possible to withdraw
the money, this action will often incur a penalty. Premature withdrawal is usually subject to a
substantial early withdrawal penalty.

Purpose
The purpose of investing in a CD is to earn steady interest on your money, which you
know you'll get back at maturity. Your initial deposit will never decline in value, unlike
stocks or bonds. Also, you will earn higher interest rates than those paid by other bank
savings accounts. If you are risk-averse, living on limited funds or want to invest without
losing money, a CD may be the right choice.
One of the main draws of buying a CD is that the money is safe and will be returned
to the CD buyer. They don’t come with the same types of financial risks that stock
investments always do. With CDs, the interest rate can do one of two things for the buyer of
the certificate of deposit. The interest rate can be paid to the buyer as soon as it is earned.
The buyer can then either take the money out of the CD or can roll the principle amount into

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Certificate of Deposit
a new CD for a new time period. The interest rate can also be rolled into the CD along with
the principle so that the principle becomes increased.

Another benefit of buying a CD is that the interest rates offered for this type of
financial product is generally higher than if the same amount of money was placed into a
savings account for the same period of time. To get a certificate of deposit, consumers can
visit a bank or a credit union. To get the best interest rate, shop around and be willing to do
so each time the CD matures and the money is available in order to take advantage of the
best rates.

Usage
➢ Institutions usually grant higher interest rates on CDs than they do on demand
deposits.
➢ At most institutions, the depositor can arrange to have the interest periodically mailed
as a check or transferred into another account.
➢ Financial institutions send out notices to the depositors shortly before their maturities
requesting directions

Certificate of Deposit by UBL


Two Types of Profit Payment Options:
➢ Profit Payment at Maturity
➢ Monthly Profit Payment
Stable & High Rate of Return:
Avail one of the best and most stable rates of return by investing in CODs.
Wide Choice in Tenor of Deposit: 3 month to 10 Years
You have the convenience of investing your money for the duration of your choice:
anywhere from 3 months to 10 years.
Security
UBL understands the value of your hard earned money and continues to deliver on the
promise of safety and security. UBL's A+ credit rating by PACRA ensures a secured
investment for your money.
Easy Available Financing

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Certificate of Deposit
You can take a loan against CODs for both your short and long term financing needs. You
can avail financing up to 90% of your deposit at a very nominal cost, allowing you to earn
high profits and still have the liquidity to meet your financial needs.

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Certificate of Deposit

Easy Availability
UBL Profit CODs are available across the nation at 921 online branches in more than 400
cities across Pakistan. Simply walk into your nearest online UBL branch and make a smart
investment through Certificate of Deposit (COD).
Free Insurance Coverage
All COD customers shall also be eligible for the UBL Accidental Death and Permanent
Disability scheme

Advantage of Certificate of Deposit (CD)

The main advantage of Certificate of Deposits (CD) is their safety and the advance
knowledge of published rate of returns. The depositor generally earns more on CDs than in a
savings account.

Problems
CD interest rates closely track inflation. For example, in one situation interest rates
may be 15% and inflation may be 15%, and in another situation interest rates may be 2% and
inflation may be 2%. Of course, these factors cancel out, so the real interest rate is the same
in both cases.
In this situation, it is a misinterpretation that the interest is an increase in value.
However, to keep the same value the rate of withdrawal must be the same as the real rate of
return, in this case, zero. People may also think that the higher-rate situation is "better," when
the real rate of return is actually the same.
Also, the above does not include taxes. When taxes are considered, the higher-rate
situation above is worse, with a lower (more negative) real return, although the before-tax
real rates of return are identical. The after-inflation, after-tax return is what's important.

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Certificate of Deposit

Conclusion
Safety is a trademark of the traditional certificate of deposit (CD) sold by a bank or
credit union. Investors seeking a low-risk investment expect that many CDs, when held to
maturity, will return the full amount of the original investment, even if the institution issuing
the CD collapses. Examining the terms and conditions of a potential CD is key to selecting
the best investment. Investors can locate the right CD for their needs by taking all of the
details into consideration.

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Certificate of Deposit

References

http://www.investopedia.com/terms/c/certificateofdeposit.asp

http://www.reliancepakistan.com/products/faq_05.php

https://www.ubl.com.pk/retail/deposits/ubl_profit/

http://en.wikipedia.org/wiki/Certificate_of_deposit

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