Certificate of Deposit
Also written CD · Certificate of Deposit (CD)
A negotiable, unsecured money market instrument issued by a bank as a usance promissory note against deposited funds, for 7 days to 1 year (1 to 3 years for All India Financial Institutions), in Rs 5 lakh multiples.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Accrued interestCoupon earned from the last coupon date up to settlement, paid by the buyer to the seller on top of the negotiated price, because the issuer will pay the whole coupon to whoever holds the bond next.
- Bond Equivalent YieldThe annualised simple-interest return on a money market instrument, computed on price and a 365-day year, so instruments of different maturities can be compared on one basis.
- Call moneyUncollateralised overnight lending and borrowing of funds between scheduled commercial banks and primary dealers — the shortest segment of the Indian money market.
- Call optionA contract giving its buyer the right, but never the obligation, to buy the underlying at a fixed strike price — so the loss is capped at the premium and the gain is not.
- Cash Management BillsVery short-term discounted Treasury Bills of under 91 days, issued by the Government of India to bridge temporary mismatches in its own cash flow.
- Convertible bondA bond carrying an embedded option that lets the holder exchange it for a specified number of the issuer's equity shares — a plain bond plus an equity conversion right.
Where this is taught
- Series X-A · Chapter 9: Investing in Fixed Income Securitiesintroduced here
- Series VII · Chapter 1: Introduction to Securities Marketintroduced here
- Series VI · Chapter 11: Special Services - Debt Instruments & Government Securitiesintroduced here
- Series IV · Chapter 1: Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Marketsintroduced here
- Series II-A · Chapter 3: Characteristics of Debt Securitiesintroduced here
Related terms
- Call moneyUncollateralised overnight lending and borrowing of funds between scheduled commercial banks and primary dealers — the shortest segment of the Indian money market.
- Bond Equivalent YieldThe annualised simple-interest return on a money market instrument, computed on price and a 365-day year, so instruments of different maturities can be compared on one basis.
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