[This is part of the series: The Complete Guide To Economics 101.]
What is a certificate of deposit?
A Certificate Of Deposit (CD) is a consumer bond issued by a bank with a fixed maturity date.
Each specified period, a CD will pay a set interest rate, but all funds are tied up until maturity.
For example, a $100 CD might pay 3%.
In this case, the customer first buys the bond for $100.
And at the end of one year, the bank pays the customer back the principal plus interest, $103.