[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.

[This is part of the series: The Complete Guide To Economics 101.]

What are the capital markets?

Capital Markets are markets where buyers and sellers exchange financial assets.

To raise money, some firms obviously sell financial assets for liquidity.

Maybe a publishing company in Lubbock wants to sell 10 percent of their equity for $30 million to spur growth.

And, on the other side, other entities have excess funds to invest.

Maybe Conde Nast wants to diversify into this new publishing platform.

Equity is purchased for cash in this case.

And this exchange is said to take place in the capital markets.