Index-Linked Certificates of Deposit
What is an index-linked certificate of deposit (CD)?
Index-linked CDs are similar to traditional Certificate of Deposit, but they allow the investor to participate in the appreciation, if any, of a particular stock index (like S&P 500), during the term of the CD. An […]
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How do I earn interest on an index-linked Certificate of Deposit (CD)?
It depends on how the CD is structured. The interest on an index-linked CD is tied to an index—such as the S&P 500 or the Russell 2000—selected by the bank. Depending upon how the CD is structured, you could earn interest […]
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Is 100 percent of my index-linked Certificate of Deposit (CD) protected?
The principal is protected. Index-linked CDs are 100 percent principal-protected, subject to early withdrawal penalties (if applicable) and Federal Deposit Insurance Corporation (FDIC) insurance limits. However, if […]
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Will I receive periodic interest payments on my index-linked Certificate of Deposit (CD)? Are these payments taxable?
Unlike traditional CDs, periodic interest payments are typically not paid on an index-linked CD. However, investors are required to include a "comparable yield" in their gross income each year for federal income tax […]
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Are index-linked Certificates of Deposit (CDs) FDIC insured?
The principal amount of an index-linked CD is insured by the FDIC up to the maximum applicable deposit insurance coverage. However, any contingent interest owed to the investor generated by the index-linked CD is the […]
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Can I redeem my index-linked Certificate of Deposit (CD) before its maturity date?
It may be possible, but there are usually penalties. There may be no active secondary market for an index-linked CD. If early redemption is available, penalties (including loss of principal) can be significant. […]
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