Useful Terms of Certificates of Deposit

Before investing in certificates of deposit of varying maturities and types, an investor should fully understand certificates of deposit terms such as: .

The yield received if the Federally Insured Deposits is not called before its final maturity date and the coupons are reinvested at the current coupon rate (5.00% in the example on fixed coupon).

 

• Annual Percentage Yield (APY):

A uniform method of calculating the return on a deposit account, disclosed as required by the Federal Truth in Savings Act (5.00% in the example).

 

• Yield to First Call Date:

The yield received if the Federally Insured Deposit is called on the earliest possible call date (5.00% in the example), when issued at par or greater.

 

• Yields to All Call Dates:

The effective yields received at any potential call date (semiannually, 7/10/06 to 1/10/23 in the example).

 

• Spreads to All Payment Dates:

The spreads, or differences, between the callable, fixed-coupon Federally Insured Certificates of Deposit yields and comparable-maturity Treasury note yields, at all payment dates (semiannually, 7/10/06/ to 7/10/23 in the example).

 

This information gives investors a way to compare a particular callable, fixed-coupon Federally Insured Certificates of Deposits with alternative comparable-quality investments.