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Simple English definitions for legal terms
negotiable certificate of deposit
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A quick definition of negotiable certificate of deposit:
A negotiable certificate of deposit is a piece of paper that a bank gives you when you deposit money with them. It promises to give you back your money with interest after a certain amount of time. It's like a special savings account that you can sell to someone else if you need the money before the time is up. It's a way for banks to borrow money from people for a short period of time.
A more thorough explanation:
A negotiable certificate of deposit is a type of security issued by a financial institution that serves as a short-term source of funds. It usually has a fixed interest rate and a maturity of one year or less. The certificate acknowledges the receipt of money and promises to repay the depositor.
For example, if you have $10,000 that you want to invest for a short period of time, you can purchase a negotiable certificate of deposit from a bank. The bank will pay you a fixed interest rate for the duration of the certificate, and at the end of the term, you will receive your initial investment plus the interest earned.
Negotiable certificates of deposit are often used by businesses and individuals as a low-risk investment option. They are considered safe because they are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor per bank.