INVESTMENT ACCOUNTS » Investing Money

If you’ve invested in certificates of deposit, it’s likely you’ve heard of the negative CD yield curve, which represents a change in how interest rates are applied to short-term and long-term investments. However, if you haven’t heard of it and are interested in investing in CDs, now’s the time to learn more about it.

The Definition of the Negative CD Yield Curve

Planning for your financial future in today’s economy is nothing short of challenging. Many investors are just now taking steps to help protect their principal and one way to ensure a bit of financial protection is through a low risk, FDIC insured CD. CDs can be chosen to either compound the interest or roll it over into a savings account. By opting for a CD with a compounding interest structure, your money can earn even more.

Interest calculation are important for CDs as it can help you understand the earning potential of the money you are investing. Typically CDs start earning interest the day they are opened, however the first month’s interest payment will not post until the completion of one month’s time. Then the second month’s interest will be earned not only on your initial deposit, but also on the interest that was added to your account. That behavior will continue for the life of your CD, until the CD matures. This pattern is the important feature of compounding interest.

In good economies and bad economies, everyone wants to make as much money as they possibly can. More money means more choices, more security, and more freedom. When we make money we want to see that money work for us, so we invest it. Many people invest in certificates of deposit, or CDs. CDs are a type of promissory note, sold by banks and other kinds of financial institutions, that guarantee a return on our investment through an interest rate applied to the amount of the CD. This interest rate can vary over the life of the CD.

The interest rate on certificates of deposit used to be one fixed rate. That has changed, and now banks and other financial institutions which offer CDs are offering variable interest rates. Variable-rate CDs have their interest rates linked to such major interest rate indexes as the prime rate.

If investing in CDs is on your agenda then it’s a good idea to make sure that you understand what APY is. Both APY and APR reflect the interest rate you will get on your CD. But APY is the precise measure of the interest you receive after 1 year, while APR is only an approximation.

What is an APY?

An APY is also known as the annual percentage yield and reflects the amount of interest earned for your CD. What makes the annual percentage yield different from standard interest earnings is that it reflects compound interest, which moves at a separate frequency than simple interest. Instead of simply adding interest at year-end as would occur with the APR, APY adds the interest up within the year in intervals predetermined when your certificate of deposit is purchased. For example, you may be investing in CDs that offer semi-annual compound interest. This means, instead of adding your interest at the end of the year, you would add it up mid-year. Next, you would take the amount of interest earned and add it to the principal amount (the amount you first deposited). For the second half of the year, you would then be earning interest on the principal amount, as well as the amount that was added to your principal in interest.

CDs are forms of investment that earn interest, which is how investors gain a return; however, investors find that they earn greater returns on compound interest. The difference between compound interest and its opponent, simple interest, is how it is earned. Simple adds earns only once the end of a year, while compound continues to earn even after previous interest earned has already been tacked on.

How Do CDs Earn Interest?

If a certificate of deposit is on your investment agenda then it’s good to learn about returns you can gain by utilizing a CD calculator. Found on numerous banking and investment websites, these calculators allow you to pre-determine just how much money you can make based on the amount you invest in a certificate of deposit.

What is a Certificate of Deposit?

Making Money from US Savings Bonds is an easy, safe, and secure way to make your investments grow. Investors in savings bonds need to be patient and have the expendable income so to get the fullest return on their investment they need to let their savings bonds mature.

Here are some basic instructions for Making Money from US Savings Bonds:

One of the many insider Wall Street terms that you may not be familiar with is a “closing transaction.” A closing transaction essentially brings an investment, whatever it might be, to an end. Once the transaction has been performed the investor will no longer have an ownership stake in his or her investment.

Before a closing transaction can be performed, however, both the seller and the buyer must live up to all the details and demands of the contract being fulfilled. Whatever is required before a closing transaction can be performed must be dealt with. If there is something left unfinished then the closing transaction cannot be performed, or, if it is, it will be considered invalid. Closing transactions are rarely made by the investor. Rather, the closing transaction is executed by a broker.


In the case of an option, the closing transaction can be a sale, if the investor has a long position on the option; or it can be a purchase, if the position on the option is a short one. Either way, the closing transaction indicates that the ownership of the option, security or other investment vehicle has either been relinquished or changed hands.

Have you thought about making your fortune on Wall Street and the world of high finance? If so, you’ve probably noticed that there are so many different terms and concepts used that you’ve never heard of before. One of these is “closing purchase.” A closing purchase will be made in order to reduce or eliminate altogether a position, which can either be long or short, on a stock or an options series.

In order to understand a closing purchase, you first need to understand the meaning of two things: positions and options. A position is finance industry jargon for having possession of a commodity, option, contract or security. They are almost always held in a brokerage account. So, when an investor or broker wants to buy an option, he or she is placing an order that people refer to as “buy to open.” With a closing purchase, conversely, the investor or broker places an order to “sell to close.” A long position means that you actually own the security, and a short position means that you owe it. Options, on the other hand, are contracts to buy or sell a stock within a certain period of time. A closing purchase will be executed in order to sell the option.

It seems as though the longer we live the more we realize just how important it is to save our money. When we’re younger we are more inclined to live without thought for tomorrow, and so we spend what we get. It only takes one emergency or threat of an emergency to make us sit up and take notice of the fact that we need to be prepared for emergencies as well as build stepping stones to a brighter future. Much of this is accomplished by saving, and one popular way of saving money – while at the same time making it – is to invest in certificates of deposit. CDs, as they’re more commonly known, can’t be accessed (without being penalized for it) for their lifespan until they reach their maturity date. Because of this reason, many people like to take out loans against their CDs.

When you borrow against your CD, many of the terms of the loan will be influenced by the nature of your CD. In the first place, you should probably go to the bank where you currently hold the CD and take out the loan there. Most, if not all banks are disinclined to offer loans against CDs held at other banks. The size of the CD will influence the size of the loan of course, seeing as you’re using the CD as collateral for the loan. You will also see the loan you take out against your CD be influenced by the lifespan of your CD, since certificates of deposit come with varying maturity dates. When you borrow against your CD you can borrow up to 100% of its value.